Saturday, December 22, 2007

Differences in Uncompensated Care Provided by For-Profit and Nonprofit Hospitals Called "Insignificant"

In a report released yesterday, the California State Auditor found no significant difference between the amount of uncompensated care provided by nonprofit and for-profit hospitals.  The report concluded, however, that nonprofit hospitals provide other community benefits not provided by for-profit hospitals.  The report further concluded that it was difficult to quantify those other benefits because of the manner in which nonprofit and for-profit hospital financials are reported.  Here is an excerpt from the report's summaries:

Our review of tax-exempt hospitals revealed the following:

  • About 223 of California's 344 hospitals are eligible for income and property tax exemptions because they are organized and operated for nonprofit purposes.
  • Comparing financial data reported by nonprofit and for-profit hospitals indicated the uncompensated care provided by the two types of hospitals was not significantly different.
  • Benefits provided to the community, which only nonprofit hospitals are required to report, differentiate nonprofit hospitals from for-profit hospitals, but the categories of services and the associated economic value are not consistently reported among nonprofit hospitals.
  • The values of tax-exempt buildings and contents owned by nonprofit hospitals are frequently misreported by county assessors.
  • Lacking more reliable data, we used the reported economic values of community benefits and tax-exempt property to estimate that reported community benefits of $656 million for 2005 were roughly 2.7 times the estimated $242 million in state corporation income taxes and property taxes not collected from nonprofit hospitals.
  • The Franchise Tax Board, which administers state income tax exemptions, could better use available tools, such as annual filings and audits, to monitor the continuing eligibility of nonprofit hospitals for their tax exemption.


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On the subject of the “community benefits” that nonprofit hospitals provide... I've been researching the Jewish hospital movement in the US. (Between 1850 and 1953, over sixty nonprofit hospitals sponsored by Jewish communities were founded in 26 cities across the country.) Some of the benefits these provided to Jewish individuals and communities were unrelated to charity care. After the mid-1920s, one of the main rationales for Jewish hospitals was to provide Jewish medical school graduates with internship and residency opportunities, and Jewish physicians with admitting and treating privileges. This continued until anti-Semitism declined in the US by the 1960s. Also, Jewish hospitals facilitated and improved the delivery of hospital care to Jews of all economic strata, for example, by providing Yiddish speakers to patients who didn't speak English, access to kosher food, rabbis, keeping away missionaries looking for deathbed conversions, etc.

Also when discussing nonprofit hospitals, there's a supply-side perspective in assessing what these entities add to the world. At a time when Jews were unwelcome in many of the leading philanthropies of the time, Jewish hospitals provided Jews with a special and self-respecting way of doing philanthropy: fundraising events that they could attend without being dissed; auxiliaries welcome Jewish volunteers. In all these ways and more, Jewish hospitals were a tremendous source of pride to Jews, the most visible symbol of Jewish philanthropy to most non-Jews.

In considering what makes nonprofit hospitals special beyond the quantity of charity care they provide as compared to for-profits, to what extent do we/should we/can we take into account the benefits -- both tangible and intangible -- they provide to a marginalized, disadvantaged, and/or discrete and insular minority communities? (The IRS addressed the staff privileges issue through Rev.Rul. 69-545, which made non-discriminatory granting of medical staff privileges a factor in determining a hospital's eligibility for 501(c)(3) status.)

Posted by: Robert Katz | Dec 22, 2007 10:45:27 AM

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