Nonprofit hospitals fall short on community benefit, studies show

Research adds to the mountain of evidence showing nonprofit hospitals continue to fall short in their community benefit.

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Gabby MigliaraApril 24, 2023

Nonprofit hospitals fall short on community benefit, studies show.

Nonprofit hospitals are supposed to help provide access to crucial treatment and services in our most vulnerable communities. But recent research adds to the mountain of evidence showing nonprofit hospitals continue to fall short in their community benefit. For example, many nonprofit hospitals participate in the federal 340B Drug Pricing Program, where eligible large nonprofit hospitals can buy deeply discounted 340B medicines and then turn around and charge both uninsured patients and insurance companies higher prices, pocketing the difference with little to no evidence they use that money to help patients. This is an alarming practice that does a disservice to low-income patients around the country. 

In case you missed it:

  • The Lown Institute analyzed almost 2,000 nonprofit hospitals, comparing how much they spent on charity care and community investment as compared to the value of the tax breaks they received. The study found 77% of nonprofit hospitals studied spent less on charity services than they gained from tax breaks. This is a stark contrast to how nonprofit hospitals should operate — and it isn’t the only example of hospitals taking advantage of benefits intended for the safety net. The vast majority of the top 25 nonprofit hospitals in the study whose tax exemption exceeded their charity care contributions participate in the 340B program — a program designed to give discounts on medicines to participating hospitals so that they can in turn better serve vulnerable communities. This is a blatant disregard for the intent of nonprofit status and the 340B program.

  • Based on Internal Revenue Service data, over a third of nonprofit hospitals in the United States compensate their trustees, and those hospitals have lower charity care rates than hospitals that do not compensate their trustees. From 2011 to 2019, average trustee compensation across all U.S. nonprofit hospitals increased by 46%, while the average charity-care-to-expense ratio decreased by 21%.

  • The Kaiser Family Foundation found the total estimated value of tax exemption for nonprofit hospitals was about $28 billion in 2020. This is nearly double the amount of money spent on charity care ($16 billion) that same year.

  • Health Affairs found that while large nonprofit health systems are reporting financial strain, that strain is driven primarily by investment losses. Many nonprofit hospitals blame extra expenses during the pandemic for their inability to provide charity care due to lack of funding. Unfortunately, the reality is far less heroic.

Nonprofit hospitals should be safety nets in their communities, yet there is increasing evidence raising doubt about whether they are investing all they can and using programs like the 340B program to help vulnerable patients. 


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