Friday, May 6, 2016
As has been covered in this space repeatedly (for example, with respect to Illinois and Maine), the combination of wealthy nonprofits, valuable real estate, and government budget pressures continues to lead to battles between those nonprofits and governments over property tax exemptions. New Jersey has become perhaps the most active battleground - NorthJersey.com reported last month that 26 of the state's 62 nonprofit hospitals are now embroiled in tax-court cases, building on a 2015 Tax Court of New Jersey ruling against Morristown Medical Center. While earlier this year New Jersey Governor Chris Christie announced an agreement to freeze property tax assessments for nonprofit hospitals for two years in order to give a to-be-formed Property Tax Exemption Study Commission time to review the issue, the legislature has yet to act on the legislation needed to implement this proposal. Additional coverage: NJ.com. The hospital battles join the ongoing lawsuit by individual residents of Princeton, N.J. against Princeton University that a state trial judge has refused to dismiss (a decision now upheld earlier this year by a state appellate court). For recent coverage of that suit, see Bloomberg and Fortune.
In related news, Gerard F. Anderson (John Hopkins) and Ge Bai (Washington & Lee) just published a study reporting that seven of the ten most profitable hospitals in the United States in 2013 were nonprofits. At the same time, they found more than half of the hospitals they studied (which included for-profit and public hospitals as well as nonprofits) incurred losses from patient care services and only 2.5 percent earned more than $2,475 per adjusted discharge. Here is the abstract for the study, which appears in HealthAffairs:
To identify the characteristics of the most profitable US hospitals, we examined the profitability of acute care hospitals in fiscal year 2013, measured as net income from patient care services per adjusted discharge. Based on Medicare Cost Reports and Final Rule Data, the median hospital lost $82 for each such discharge. Forty-five percent of hospitals were profitable, with 2.5 percent earning more than $2,475 per adjusted discharge. The ten most profitable hospitals, seven of which were nonprofit, each earned more than $163 million in total profits from patient care services. Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals. Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics. These findings can inform policy reforms, while providing a baseline against which to measure the impact of any subsequent reforms.