A recent study by the Lown Institute reveals that 80% of nonprofit hospitals contribute less to their communities than they receive in estimated tax benefits. In some cases, the difference amounts to hundreds of millions of dollars.
The Lown Institute's press release explains that under federal, state, and local laws, nonprofit hospitals are exempt from certain taxes. These exemptions were created on the premise that these institutions would reciprocate by providing services such as patient financial assistance, primary care clinics, and substance abuse treatment to their communities.
Using 2021 Internal Revenue Service data, the Lown Institute examined 2,425 U.S. nonprofit hospitals. The findings show that over 1,900 of these hospitals pay less than what is considered their "fair share." According to the institute's research, the combined fair share deficits of these nonprofit hospitals total $25.7 billion—sufficient to clear the medical debt of everyone in California, Texas, New York, and Pennsylvania combined.
"When four out of five nonprofit hospitals do not meet obligations to benefit their community, it’s a sign that regulations and incentives need to be revisited," said Vikas Saini, MD, president of the Lown Institute. "Everyone wants to see their local hospital thrive, but not at the expense of the communities they serve."
The press release also identifies nonprofit hospitals with significant fair share deficits. These include New York-Presbyterian Hospital (New York), -$274 million; UPMC Presbyterian (Pittsburgh), -$268 million; NYU Langone Hospitals (New York), -$222 million; Cleveland Clinic Main Campus (Cleveland), -$212 million; and Mayo Clinic Hospital (Rochester), -$165 million. On average, these hospitals spent 3.87% of their budget on community investments according to the research conducted by Lown Institute. However, this figure can vary significantly: for instance, while The Hospital of the University of Pennsylvania spent only 0.25% of its expenses on community investments, North Shore University Hospital in Manhasset, N.Y., allocated 8.84%.
Saini further criticized the current regulatory framework: "Federal regulation of community benefit spending is woefully ineffective and in need of reform," he said. "Though hospitals are required to report their community contributions to the IRS, there is no minimum spend, there are many loopholes, and enforcement is practically nonexistent."
