Friday, February 23, 2024

Side Effects of the Tax Cuts and Jobs Act of 2017: Evidence from the Hospital Industry

Tax Incidence

Samantha Liew and Frank Murphy, on SSRN

We examine how the Tax Cuts and Jobs Act of 2017 (TCJA) altered the hospital industry. Nonprofit hospitals make up approximately 80 percent of all hospitals and generally have an advantage over their for-profit counterparts due to their tax-exempt status. Provisions in the TCJA exogenously increase the relative cash flow in for-profit hospitals compared to nonprofit hospitals. We hypothesize and find that this comparative change in tax-driven cash flows results in greater investment, primarily in capital assets, among for-profit hospitals relative to nonprofit hospitals. We then test for changes in the quality of care around the TCJA and present evidence of a reduction in relative readmissions among for-profit hospitals, indicating an increase in for-profit quality of care. Lastly, using financial data from California hospitals, we find that the TCJA reduced implicit taxes among for-profit hospitals. Our results contribute to the tax literature by providing initial evidence of how a shift in tax policy altered the dynamics of the hospital industry.

darryll k. jones

https://lawprofessors.typepad.com/nonprofit/2024/02/side-effects-of-the-tax-cuts-and-jobs-act-of-2017-evidence-from-the-hospital-industry.html

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Comments

The American Hospital Association (AHA) has different figures on nonprofit hospitals. See: https://www.aha.org/statistics/fast-facts-us-hospitals

According to their 2024 data:

Total Number of All U.S. Hospitals -- 6,120
Number of U.S. Community Hospitals -- 5,129
Number of Nongovernment Not-for-Profit Community Hospitals -- 2,987
Number of Investor-Owned (For-Profit) Community Hospitals -- 1,219
Number of State and Local Government Community Hospitals -- 923
Number of Federal Government Hospitals -- 207
Number of Nonfederal Psychiatric Hospitals -- 659
Other Hospitals -- 125

Posted by: Michael L. Wyland | Feb 23, 2024 2:09:12 PM

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