Nonprofit Hospitals May Provide Less Community Benefit Than For-Profits in Some States

By Consumers For Quality Care, on March 16, 2022

New research found that some for-profit hospitals provide more uncompensated care than nonprofit hospitals, according to Healthcare Dive, even though nonprofit hospitals enjoy tax-exempt status hinging on the condition that they provide community benefits.

There are no federal requirements regarding minimum community benefits. One of the largest components of community benefit supposedly provided by nonprofits, unreimbursed Medicaid costs, is poorly aligned with automatic tax subsidies they receive. The research found that in 2019, 3,446 private hospitals – 2,617 nonprofits and 829 for-profits – incurred $20.6 billion in unreimbursed Medicaid costs, representing just 2.5 percent of their total expenses.

The research identified a statewide ratio of unreimbursed Medicaid expenses compared to total Medicaid expenses. In many cases, nonprofit hospitals had a higher ratio of Medicaid expenses, covered, as compared to for-profits. Researchers suggested that lawmakers should encourage more transparency regarding subsidies received by nonprofit hospitals and link those subsidies to provision of community benefits.

Estimates have valued the tax benefits and subsidies nonprofit hospitals enjoy at $25 billion. Nonprofit hospitals must do more to ensure profits are used to benefit the consumers and communities they serve.