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The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association’s (AHA) A...
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Non-profit hospitals are expected to provide charity care and other community benefits to adjust their tax exemption status. Using the Medicare Hospital Cost Report, American Hospital Association Annual Survey, and the American Community Survey datasets, we examined if church-affiliated hospitals spent more on charity care and community benefit. Fo...
Citations
... Prior analysis of the community health initiatives of a representative 20% sample of US nonprofit hospitals found that almost 75% of hospitals used health equity as a guiding theme when developing their IRS-mandated community health needs assessment (CHNA) (5). However, to date, it is unclear how hospitals have leveraged their community benefit programs to address social and structural determinants of health and health equity, specifically prioritizing structural racism (6)(7)(8). ...
Introduction
The aim of this study was to explore the factors and processes that drive nonprofit hospitals’ willingness and ability to implement equity-focused community benefit initiatives – specifically initiatives aimed at addressing social and structural determinants of health and inequities associated with racism.
Methods
We conducted a cross-sectional qualitative study using semi structured interviews guided by the EquIR Implementation science framework and Browne’s racial equity approach to community benefit program implementation. Browne’s racial equity approach includes five strategies: (1) prioritizing community building strategies in communities impacted most by racism, (2) allocating resources to address structural determinants that reflect racism, (3) providing leadership and employment opportunities for community members and organizations impacted by racism, (4) addressing and considering multiple intersecting identities, and (5) removing organizational barriers to allocating resources to address health inequities along racial lines.
Results
We conducted 24 interviews with leaders of 23 hospitals and health systems representing the Northeast, South, Midwest and West United States regions. We used directed content analysis to analyze interview data. The racial equity strategies most often used were 1, 2, and 3. The strategies least likely to be mentioned were 4 and 5.Two of the 23 health systems engaged in all five strategies.
Conclusion
Health systems have the potential, partnerships, and resources to incorporate a racial equity lens into the planning, design, and implementation of their community-based initiatives. Utilizing a racial equity approach that includes prioritizing affected communities and providing resources and strategies to overcome barriers to accessing those resources is a template that can be used by hospitals to get closer to more effectively achieving this goal.
... Brickley and Van Horn (2002) and Joynt et al. (2014) noted that some non-profit executives receive excessive compensation as incentives to improve organizations' financial performance instead of providing charitable services. Herring et al. (2018) and Zare, Eisenberg, and Anderson (2022) questioned that many non-profit hospitals may not provide sufficient community benefits that match the financial value of their tax exemptions. ...
... From a supply-side perspective, our research demonstrated that non-profit hospitals that can access more resources do not provide more community benefits. Several studies showed that the value of tax exemption exceeds the community benefit provided by non-profits (Bai, Zare, and Hyman 2022;Herring et al. 2018). This implies that the tax-exempt status granted to non-profit hospitals may be an inefficient allocation of resources, and the tax revenue that could have been generated from these organizations could have been used to fund other social services and programmes that promote social equity. ...
... Numerous studies have found wide variations across nonprofit hospitals in the value of the community benefit and charity care they provide; other studies have compared the value of their community benefit or charity care to the value of their tax exemption (Herring et al., 2018;Johnson et al., 2019;Lamboy-Ruiz et al., 2019). Studies have shown that some nonprofit hospitals spend only a small portion of their community benefit spending on services that help the community and a much greater percentage on services that benefit the hospital (Wen et al., 2022). ...
... Studies have shown that specific hospital characteristics are associated with higher levels of community benefit and charity care spending (Herring et al., 2018;Zare et al., 2021aZare et al., , 2021b. These characteristics are the number of hospital beds, teaching status (defined as minor-teaching if the intern-to-bed ratio is < 0.25 or major-teaching if the intern-tobed ratio is > 0.25), church affiliation, percentage of Medicare and Medicaid discharges, number of physicians with admitting privileges, system affiliation, availability of obstetrics or trauma services, and rural location. ...
... Hospital market characteristics have also been shown to be associated with the provision of these services, so we used the Herfindahl-Hirschman Index (Herring et al., 2018) to categorize hospitals into low (<0.15), medium (0.15-0.25), and high (>0.25) ...
Goal:
We examined the variation in community benefit and charity care reporting standards mandated by states to determine whether state-mandated community benefit and charity care reporting is associated with greater provision of these services.
Methods:
We used 2011-2019 data from IRS Form 990 Schedule H for 1,423 nonprofit hospitals to create a sample of 12,807 total observations. Random effects regression models were used to examine the association between state reporting requirements and community benefit spending by nonprofit hospitals. Specific reporting requirements were analyzed to determine whether certain requirements were associated with increased spending on these services.
Principal findings:
Nonprofit hospitals in states that required reports spent a higher percentage of total hospital expenditures on community benefits (9.1%, SD = 6.2%) compared to states without these requirements (7.2%, SD = 5.7%). A similar association between the percentage of charity care and total hospital expenditures (2.3% and 1.5%) was found. The greater number of reporting requirements was associated with lower levels of charity care provision, as hospitals allocated more resources to other community benefits.
Practical applications:
Mandating the reporting of specific services is associated with greater provision of certain specific services, but not all. A concern is that when many services must be reported, the provision of charity care might be reduced as hospitals choose to allocate their community benefit dollars to other categories. As a result, policymakers may want to focus their attention on the services they most want to prioritize.
... members of health systems, and hospitals located in nonrural areas. Other studies have found similar characteristics -larger size, teaching status, non rural location, and hospital membership -were associated with hospitals being more likely to address community health needs (Alberti et al. 2018;Carroll-Scott et al. 2017;Cramer et al. 2017;Franz et al. 2021a, b;), and higher overall commuity benefit spending (Herring et al. 2018;Cramer et al. 2017;Atkins et al. 2020). The mechanism which links these characteristics to a greater focus on equity, however, is unclear. ...
Background
Hospitals can improve health care quality and population health by addressing equity and the social and structural determinants of health. One avenue for hospitals to address equity is through their community benefit programs. However, it is unclear how often hospitals incorporate an equity perspective into their community benefit program design and implementation and what community or hospital characteristics are associated with hospitals that do so.
Methods
This study was a cross sectional analysis of nonprofit hospitals’ community health needs assessments (CHNAs) and implementation strategies (ISs) from a national sample of 474 nonprofit US hospitals. The dependent variable of interest was whether a hospital used equity as a guiding framework to develop their CHNA or IS. Descriptive statistics and logistic regression were used to assess hospital and community characteristics significantly associated with hospitals using equity as a guiding framework to develop their CHNAs and ISs.
Results
The majority of hospitals used equity as a guiding framework. Three hospital characteristics, teaching, non-rural, and hospital system membership, predicted using equity as a guiding framework.
Conclusion
Future studies should (1) include additional methods and measures to explore the mechanisms driving hospitals to adopt an equity framework, and (2) explore whether hospitals that use equity as a guiding framework are more likely to implement equity related community benefit programs.
... Many affluent nonprofit hospitals have also received unfavorable coverage in the media for their reportedly excessive profit margins, luxurious office buildings, and lucrative compensation packages for senior leaders (Andrzejewski 2019). In the hospital domain, some policy analysts and researchers argue that nonprofit hospitals should be required to contribute benefits to their communities in an amount that meets or exceeds their tax exemptions, whereas only 62% of nonprofit hospitals achieve that level (Herring et al. 2018). ...
Corporate social responsibility (CSR) fit is the congruence between an organization’s CSR and core activities. Past research has typically studied CSR fit as a single dimension, often finding that high fit CSR is more effective than low fit CSR for for-profit firms. The current research distinguishes between two dimensions of CSR fit—CSR that fits with core or non-core organizational activities, to uncover how the magnitude of investment in each type of CSR affects customer satisfaction. The authors examine the valuable and understudied context of nonprofit organizations, specifically hospitals. Results of a six-year study of over 1,500 nonprofit hospitals suggest that non-core activity CSR positively predicts customer satisfaction, but core activity CSR does not. These findings are best explained using expectation-based theories (expectancy violation and disconfirmation): customers likely expect core activity CSR from hospitals (e.g., charity care for uninsured patients) but are delighted by non-core activity CSR (e.g., greenspace renovations). Additionally, non-core activity CSR becomes even more important for customer satisfaction for more affluent hospitals, while core activity CSR becomes increasingly important for hospitals when the community socioeconomic status is low. These nuanced results provide guidance for hospitals regarding specific CSR investment strategies that ultimately impact downstream financial reimbursements.
... This study is important because previous work has shown that the dollar value of tax benefits received by nonprofit hospitals can be greater than their spending on community benefits. [8][9][10] Better understanding of the relationship between hospital spending on community benefit and community health can help hospitals refine investment strategies and inform policy makers about the true welfare implications of non-profit hospitals' tax exemptions. ...
... We reviewed prior literature on community benefits to determine hospital investment priorities. 8,11,12 Recognizing that these priorities can evolve over time, we also conducted a nationally random sample of 12 executives responsible for allocating community benefit spending in their respective hospitals. We surveyed hospitals from each of four regions (Northeast, Midwest, South, and West), and within each region, one large (>300 beds), medium (100-300 beds), and small hospital (<100 beds). ...
... This percentage was obtained from the Centers for Medicare and Medicaid Services Hospital Cost Reports, a database that reports data on the hospital rather than the health system level. 8 We linked community benefit data to data on the three outcomes [14][15][16] Health professionals were defined as the total number of active physicians (allopathic and osteopathic), including residents, along with pharmacists (PharmDs), physician assistants (PAs), registered nurses (RNs), and advanced practice registered nurses (APRNs), a category comprising of advanced practice midwives, certified registered nurse anesthetists, clinical nurse specialists, and nurse practitioners. ...
Objective:
To determine if greater non-profit hospital spending for community benefits is associated with better health outcomes in the county where they are located.
Data sources and study setting:
Community benefit data from IRS Form 990 / Schedule H was linked to health outcome data from Area Health Resource Files, Map the Meal Gap, and Medicare claims from the Center for Medicare and Medicaid Services at the county level. Counties with at least one non-profit hospital in the United States from 2015-2019 (N = 5,469 across the 5 years) were included.
Study design:
We ran multiple regressions on community benefit expenditures linked with the number of health professionals, food insecurity, and adherence to diabetes and hypertension medication for each county.
Data collection:
The three outcomes were chosen based on prior studies of community benefit and a recent survey sent to 12 healthcare executives across four regions of the U.S. Data on community benefit expenditures and health outcomes were aggregated at the county level.
Principal findings:
Average hospital community benefit spending in 2019 was 255 per capita). Multivariable regression results did not demonstrate significant associations of total community benefit spending with food insecurity or medication adherence for diabetes. Statistically significant associations with the number of health professionals per 1,000 (coefficient, 12.10; SE, 0.32; p<0.001) and medication adherence for hypertension (marginal effect, 0.27; SE, 0.09; p=0.003). were identified, but both would require very large increases in community benefit spending to meaningfully improve outcomes.
Conclusions:
Despite varying levels of non-profit hospital community benefit investment across counties, higher community benefit expenditures are not associated with an improvement in the selected health outcomes at the county level. Hospitals can use this information to reassess community benefit strategies, while federal, state, and local governments can use these findings to redefine the measures of community benefit they use to monitor and grant tax-exemption.
... 23 An increasing body of evidence suggests that the financial exemptions afforded to many nonprofits are not justified by the economic benefits they claim to provide to their communities. 24 Senior health care executives who receive extraordinary levels of compensation, which could otherwise aid the hospital's local community, may instead spend those funds upon residential property taxes in other wealthier communities. Such circumstances raise serious questions about the cost-benefit calculus of a hospital's nonprofit status. ...
Purpose: Many factors contribute to persistent intractable disparities in health care, but the geographic separation of health care executives and patient communities has not been explored. From Congresspeople to police officers, individuals engaged in public service often face criticism for not living in the neighborhoods where they work. These critiques stem from the belief that to engage meaningfully with a community, one has to understand its experiences and share its interests—and geographic proximity offers one opportunity to bridge such divides. This article seeks to determine whether the senior executive leadership of American hospitals live in the same communities as their patient populations.
Methods: From August 2020 to January 2021, the research team identified the leadership of the “largest” and “best” hospitals in the United States (n=68). Public directories were used to locate residential addresses. Newly released U.S. Census data provided proportions of individuals identifying as black/African American and Hispanic/Latinx in each zip code. Respective demographic proportions of hospital communities and hospital leadership residence were compared.
Results: Hospitals shared the same zip codes with only three health system leaders (4.41%), seven hospital leaders (10.45%), and six deans (10.91%) of respective institutions. Hospital leadership lived in zip codes with a significantly lower proportion of black/African American (p<0.0009) and Hispanic/Latinx (p<0.0036) residents than their hospital communities.
Conclusion: This article reveals significant differences between where health care leaders live and where they work. Future research should investigate the impact of residential disparities and the consequences of potential remedies on health equity.
... Both the federal government and states use community benefit spending as a criterion for determining the tax-exempt status of nonprofit hospitals. However, recent studies by Herring et al. (2018) and Zare, Eisenberg, and Anderson (2021) suggest most nonprofit hospitals do not provide community benefits commensurate with the financial value of their tax exemption. The Patient Protection and Affordable Care Act (ACA) imposed numerous new regulations on nonprofit hospitals aimed at increasing the provision and quality of community benefit spending. ...
... It is not clear, however, whether the shift in community benefit spending was strictly the result of changes in the insured status of patients or a strategic reduction in charity care spending by nonprofit hospitals as their unreimbursed Medicaid . The latter possibility is an important consideration given that recent research byHerring et al. (2018) andZare et al. (2021) that questions whether nonprofit hospitals provide community benefit that matches the value of the tax savings they presently enjoy.This study fills a gap in the community benefit literature by considering possible interactions of state regulations with hospital spending in Medicaid expansion states. We find that state minimum community benefit requirements are associated with increased community benefit and charity care spending in Medicaid expansion states. ...
Context: Previous studies show that nonprofit hospital spending on charity care declined in Medicaid expansion states. We test whether state community benefit regulations mitigated the decline in charity care spending. Methods: We evaluate the association between state regulations and participation in the Medicaid expansion on nonprofit hospital community benefit spending and its subcategories as a share of total expenses using a fixed effects model. Community benefit spending data are obtained from the Internal Revenue Service Form 990 Schedule H filings of 1,738 hospitals in 44 states and the District of Columbia from 2010 to 2017. The stringency of state regulations is determined by comparing the provisions of state and federal requirements based on regulation information compiled by the Hilltop Institute. Findings: State minimum community benefit requirements are associated with increased community benefit and charity care spending by nonprofit hospitals in Medicaid expansion states. Conclusions: States that impose minimum community benefit requirements on nonprofit hospitals did not experience a decline in charity care spending after Medicaid expansion. The results suggest state minimum community benefit rules may expand the provision of community benefit and charitable care spending. Both the federal government and states use community benefit spending as a criterion for determining the tax-exempt status of nonprofit hospitals. However, recent studies by Herring et al. (2018) and Zare, Eisenberg, and Anderson (2021) suggest most nonprofit hospitals do not provide community benefits commensurate with the financial value of their tax exemption. The Patient Protection and Affordable Care Act (ACA) imposed numerous new regulations on nonprofit hospitals aimed at increasing the provision and quality of community benefit spending.
... Several studies provide support that nonprofit hospitals adequately justify their tax exempt status because they provide more community benefit relative to for profit hospitals [12][13][14][15][16]. However, this result depends on how broadly researchers define community benefit, and many nonprofit hospitals do not provide incremental community benefit unless bad debt or unreimbursed costs are included in calculations [17][18][19]. ...
Nonprofit hospital chief executive officer (CEO) compensation has received considerable attention in light of nonprofits’ tax-favored status as well as the high costs of hospital care. Past studies have found that hospital financial performance is a significant determinant of CEO pay but nonprofit performance, including quality and charity care, are not. Using post-ACA data, we re-examine whether a variety of hospital performance measures are important determinants of nonprofit hospital CEO compensation. We found mixed evidence with respect to the significance of the association between financial performance and uncompensated care and CEO compensation. Among the other nonprofit performance measures, patient satisfaction was significantly associated with CEO compensation, but other measures were not significant determinants of CEO compensation. Our results suggest nonprofit hospitals balance their financial health against their mission when setting CEO incentives. Additional policy targeting transparency in hospital CEO compensation may be warranted to help policymakers understand the specific factors used by hospital boards to incentivize CEOs.
