Charitable Hospital Accountability: A Review and Analysis of Legal and Policy Initiatives

1998 ◽  
Vol 26 (2) ◽  
pp. 116-137 ◽  
Author(s):  
Alice A. Noble ◽  
Andrew L. Hyams ◽  
Nancy M. Kane
Keyword(s):  
Local Authorities ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
State Legislation ◽  
American Hospital ◽  
Early American ◽  
Community Benefits ◽  
Tax Exempt ◽  
Nonprofit Hospital ◽  
State And Local

Hospitals long ago shed their role as alms houses for the poor. What vestiges remain of the early American hospital are the tax-exempt, nonprofit hospital form and a general perception that hospitals, as charitable institutions, owe a duty to their communities. The appropriateness of the nonprofit hospital tax exemption has long been debated, and many theories have been advanced to justify the tax exemption of nonprofit hospitals. In a growing number of jurisdictions, however, state and local authorities have gone beyond the theoretical debate and are challenging the tax exemption of their nonprofit hospitals. For various reasons, efforts are afoot to capture greater community benefit from nonprofit hospitals.At the heart of such challenges is the debate over the nature and extent of the duty charitable institutions owe to their communities. A demand is growing for nonprofit hospitals to earn their tax exemptions by benefiting their communities in concrete ways. Some have been stripped of their tax-exempt status by local authorities or pressured to make payments in lieu of taxes. A number of states have recently implemented initiatives in an attempt to make hospitals more accountable for their community benefits. Many hospitals are responding to this heightened scrutiny in a proactive way, by voluntarily documenting community benefits. A number of nonprofit hospitals and hospital associations are cooperating with—or even sponsoring—state legislation in this area.

scholarly journals Comparing the Value of Nonprofit Hospitals’ Tax Exemption to Their Community Benefits

2018 ◽  
Vol 55 ◽  
pp. 004695801775197 ◽  
Author(s):  
Bradley Herring ◽  
Darrell Gaskin ◽  
Hossein Zare ◽  
Gerard Anderson
Keyword(s):  
Hospital Cost ◽  
Internal Revenue Service ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
American Hospital ◽  
Internal Revenue ◽  
Community Benefits ◽  
Annual Survey ◽  
Tax Exempt ◽  
Total Community

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) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit’s total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.

The Evolution of Charity Care within the Healthcare Industry

2006 ◽  
Vol 4 (1) ◽  
pp. 101-116 ◽  
Author(s):  
Pamela C. Smith ◽  
Aaron D. Crabtree
Keyword(s):  
Charity Care ◽  
Nonprofit Hospitals ◽  
Tax Exempt ◽  
Long Time ◽  
State And Local ◽  
To Come ◽  
Definition Of ◽  
State Examination ◽  
Concise Definition

Tax-exempt classification of nonprofit hospitals has been increasingly subject to federal and state examination. Considering the benefits tax-exempt entities receive, it should not be surprising that these organizations face heavy regulatory scrutiny. The problem for tax-exempt hospitals is the lack of a clear and concise definition of charity care in order to maintain exempt status. State and local regulations aside, the IRS has not presented a consistent position regarding standards for nonprofit hospitals. This paper examines the evolution of hospital tax-exempt status and its relationship to charity care. Given the IRS's evolving and conflicting definitions of charity care, we can expect this issue to be debated for a long time to come.

scholarly journals Charity Care and Community Benefit in Non-Profit Hospitals: Definition and Requirements

2021 ◽  
Vol 58 ◽  
pp. 004695802110281
Author(s):  
Hossein Zare ◽  
Matthew Eisenberg ◽  
Gerard Anderson
Keyword(s):  
Descriptive Analysis ◽  
Charity Care ◽  
Community Benefit ◽  
Policy Makers ◽  
American Hospital ◽  
American Hospital Association ◽  
Non Profit ◽  
Gini Coefficients ◽  
Community Benefits ◽  
Total Community

Policymakers are using different ways to measure the community benefit provided by non-profit hospitals because different policy makers have different policy objectives. We compare 3 commonly used measures of community benefit; examine the correlation across the 3 measures; examine how the distribution of community benefits varies across non-profit hospitals; and compare the factors associated with the level of community benefit for each definition. The main dataset for this study is the Schedule H of IRS Form 990 data for 2017. We merged this data with the 2017 American Hospital Association (AHA), the 2017 CMS Hospital Cost Report, and the 2018 American Community Survey data. The final sample consists of 1904 non-profit hospitals. We define 3 measures of community benefit: (1) Total community benefits: combining all 17 possible measures in the 990 data; (2) Total community benefits less unreimbursed Medicaid care because it reflects a policy choice made by the state; and (3) only charity care. We also subdivided the community benefits into individual and service-based benefit. Gini Coefficients and descriptive analysis show the distribution of 3 types of community benefit measures. On average, hospitals spent 8.1% of their expenses on all community benefits; 4.3% on community benefits less unreimbursed Medicaid; and 1.7% on charity care. The provision of charity care showed more variation (Gini coefficient) than the other 2 measures. Different hospital and geographic characteristics were associated with each definition, suggesting that different types of hospitals place emphasis on different community benefits. When policy makers choose among different definitions of community benefit, they should consider what incentives they want to instill.

State-Level Community Benefit Regulation and Nonprofit Hospitals' Provision of Community Benefits

2018 ◽  
Vol 43 (2) ◽  
pp. 229-269 ◽  
Author(s):  
Simone R. Singh ◽  
Gary J. Young ◽  
Lacey Loomer ◽  
Kristin Madison
Keyword(s):  
Community Health ◽  
State Level ◽  
Health Needs ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
Minimum Income ◽  
Needs Assessments ◽  
Community Benefits ◽  
Eligibility Standards

Abstract Do nonprofit hospitals provide enough community benefits to justify their tax exemptions? States have sought to enhance nonprofit hospitals' accountability and oversight through regulation, including requirements to report community benefits, conduct community health needs assessments, provide minimum levels of community benefits, and adhere to minimum income eligibility standards for charity care. However, little research has assessed these regulations' impact on community benefits. Using 2009–11 Internal Revenue Service data on community benefit spending for more than eighteen hundred hospitals and the Hilltop Institute's data on community benefit regulation, we investigated the relationship between these four types of regulation and the level and types of hospital-provided community benefits. Our multivariate regression analyses showed that only community health needs assessments were consistently associated with greater community benefit spending. The results for reporting and minimum spending requirements were mixed, while minimum income eligibility standards for charity care were unrelated to community benefit spending. State adoption of multiple types of regulation was consistently associated with higher levels of hospital-provided community benefits, possibly because regulatory intensity conveys a strong signal to the hospital community that more spending is expected. This study can inform efforts to design regulations that will encourage hospitals to provide community benefits consistent with policy makers' goals.

scholarly journals Strategic reporting by nonprofit hospitals: an examination of bad debt and charity care

2021 ◽  
Author(s):  
Amanda Beck ◽  
Collin Gilstrap ◽  
Jordan Rippy ◽  
Brian Vansant
Keyword(s):  
Cost Of Debt ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
Social Good ◽  
Hospital Managers ◽  
Community Benefits ◽  
Stakeholder Pressure ◽  
Tax Exempt ◽  
Using Data ◽  
Bad Debt

AbstractIn this paper, we examine bad debt and charity care reporting by nonprofit hospitals around bond issuance. Given the tax advantages afforded to nonprofit hospitals, including the ability to issue tax-exempt debt, hospital managers encounter stakeholder pressure to provide community benefits. When nonprofits issue debt, they also face economic pressure to meet creditors’ financial performance expectations. We document a reporting strategy that allows nonprofit hospitals to reduce the cost of bond debt while simultaneously alleviating regulators’ and community members’ concerns about inadequate provision of charity care. Using data from public bond issues for California nonprofit hospitals, we find that hospital managers shift costs from bad debt expense to charity care in periods prior to a public bond issuance and that the strategy is associated with a lower cost of debt. Our results inform those relying on accounting measurements to infer nonprofit hospitals’ social good provisions and financial health.

Corporate Reorganization: The Last Gasp or Last Clear Chance for The Tax-Exempt, Nonprofit Hospital?

1988 ◽  
Vol 13 (4) ◽  
pp. 527-559
Author(s):  
Melvin Horwitz
Keyword(s):  
Health Care ◽  
Health Care Organization ◽  
Care Organization ◽  
Nonprofit Hospitals ◽  
Corporate Reorganization ◽  
For Profit ◽  
Not For Profit ◽  
Tax Exempt ◽  
Pros And Cons ◽  
Nonprofit Hospital

AbstractThe current revolution in health care organization and financing, increased competition, and a retrenching of industry from its commitments to expansion of health care benefits challenge the nonprofit hospital's existence as a viable entity. Hospital governing boards and administrators have turned to corporate reorganization in order to maintain their financial position and to continue to serve their communities.This Article examines the not-for-profit concept and the problems facing nonprofit hospitals. It reviews the pros and cons of reorganization and the for-profit/nonprofit controversy. It questions whether the hybridization of the hospital results in a stronger or weaker species and discusses the possible effects of the newly structured entity on the quality and delivery of health care. Finally, the Article suggests that the nonprofit hospital may survive only by a continued commitment to societal and communal values, to service rather than to profit; that this commitment is adequate justificaton for the preservation of the nonprofit system, and its preservation will reinforce and strengthen the concept.

An Empirical Examination of State and Local Revocations of Tax-Exempt Status for Nonprofit Hospitals

2005 ◽  
Vol 27 (2) ◽  
pp. 1-25 ◽  
Author(s):  
Ran Barniv ◽  
Kreag Danvers ◽  
Joanne P. Healy-Burress
Keyword(s):  
Public Health ◽  
Health Benefit ◽  
Nonprofit Hospitals ◽  
Survivorship Analysis ◽  
Tax Base ◽  
Empirical Examination ◽  
State Revenue ◽  
Tax Exemptions ◽  
Tax Exempt ◽  
State And Local

In recent years, many states and local authorities have revoked the tax exemptions for several nonprofit hospitals. In this study we examine whether hospital-specific and governmental revenue-need characteristics, organized by four underlying constructs, affect state and local tax authorities' decisions to revoke nonprofit hospitals' tax-exempt status. Based on analyses of state and local tax laws, we distinguish three types of taxes paid by hospitals: Medicaid taxes; state revenue-based taxes; and local taxes. We separately examine the effects of these characteristics on the revocation of the tax-exempt status for each type. We use survivorship analysis and fit logistic regressions that employ panel data to study the risk of revocation for each type of tax. Our results suggest that the likelihood that state authorities assess Medicaid taxes increases with the size of the tax base (i.e., patient revenue) and ability to pay, but decreases with lower revenue needs. We find that the likelihood of revocation for hospitals paying state revenue-based tax increases with the size of the tax base (i.e., total operating revenue), but decreases with public health benefits provided (e.g., charity care) and lower revenue needs. Finally, we show that the size of the tax base (public health benefit provided) increases (decreases) the likelihood of revoking the tax-exempt status for hospitals that pay local tax. Implications for local tax authorities and hospital managers are briefly discussed.

The Impact of IRS Tax Policy on Hospital Community Benefit Activities

2017 ◽  
Vol 76 (2) ◽  
pp. 167-183 ◽  
Author(s):  
Valerie A. Yeager ◽  
Alva O. Ferdinand ◽  
Nir Menachemi
Keyword(s):  
Community Health ◽  
Secondary Data ◽  
Community Benefit ◽  
American Hospital ◽  
American Hospital Association ◽  
For Profit ◽  
Not For Profit ◽  
Tax Exempt ◽  
Quasi Experimental ◽  
The Impact

The Internal Revenue Service (IRS) recently introduced tax code revisions requiring stricter oversight of community benefit activities (CBAs) conducted by tax-exempt, not-for-profit hospitals. We examine the impact of this tax requirement on CBAs among these hospitals relative to for-profit and government hospitals that were not subject to the new policy. We employed a quasi-experimental, difference-in-difference study design using a longitudinal observational approach and used secondary data collected by the American Hospital Association (years 2006-2010 including 20,538 hospital year observations). Findings show a significant increase in the reporting of 7 of the 13 CBAs among tax-exempt, not-for-profit hospitals compared with other hospitals after the policy change. Examples include partnering to conduct community health assessments ( b = 0.035, p = .002) and using capacity assessments to identify unmet community health needs ( b = 0.041, p = .001). Recent tax revisions are associated with increases in reported CBAs among tax-exempt, not-for-profit hospitals. As the debate continues regarding tax exemption status for not-for-profit hospitals, policy makers should expand efforts for enhanced accountability.

The Conversion Conundrum: The State and Federal Response to Hospitals’ Changes in Charitable Status

1997 ◽  
Vol 23 (2-3) ◽  
pp. 221-250
Author(s):  
Lawrence E. Singer
Keyword(s):  
Joint Venture ◽  
Low Cost ◽  
State Level ◽  
The State ◽  
Nonprofit Hospitals ◽  
For Profit ◽  
Tax Exempt ◽  
Federal Response ◽  
Profit Status ◽  
Hospital Conversions

The pressures encountered by hospitals in the current era of reimbursement declines and stiffened competition are well known. As the “ultimate” payors—primarily employers and government—aggressively continue to seek low cost care, the response of the hospital industry has been to move toward consolidation and efficiency-enhancing mechanisms.Increasingly, nonprofit, tax-exempt hospitals have come to believe that they are at a significant disadvantage vis-á-vis their for-profit brethren in their ability to attract the capital needed to compete in the market. A growing trend among nonprofit hospitals, therefore, is to sell to or enter into a joint venture with a proprietary organization, or alternatively to convert to for-profit status. In 1995, fifty-eight nonprofit hospitals became for-profit; hospital conversions to for-profit status in 1996 are projected to outstrip the pace established the prior year.The conversion trend has not gone unnoticed at the state level. Recently, several states have proposed or enacted laws regulating sales and conversions of nonprofit hospitals, and many more states are contemplating such legislation.

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