Nonprofit hospitals receive a wide range of subsidies, including exemption from federal and state taxes. But new evidence suggests these institutions aren’t holding up their end of the deal for the communities they serve.
In 2019, both nonprofit and for-profit hospitals reported nearly equal unreimbursed Medicaid costs as a share of total expenses. Nonprofit hospitals often receive taxpayer dollars under the pretext that they give back to the community by caring for vulnerable Medicaid patients and incurring any subsequent costs not covered by government reimbursement.
But in more than half of the 45 states with both types of hospitals, nonprofits had a lower proportion of unreimbursed Medicaid costs in relation to expenses compared to for-profit medical centers, according to data published Monday in JAMA Network Open.
“Taxpayers subsidize nonprofit hospitals in exchange for their charitable actions that benefit the community,” Ge Bai, PhD, with Johns Hopkins Carey Business School in Baltimore, and co-authors said in a statement. “Nonprofit hospitals fall short of taxpayers’ expectations when they do no more to help Medicaid patients than for-profit hospitals, which pay taxes.”
For their findings, the authors analyzed data from the Centers for Medicare & Medicaid Services 2019 Hospital Cost report. That included a sample of 2,617 nonprofit U.S. hospitals and 829 for-profit institutions.
Overall, the 2,446 hospitals took on $20.59 billion in Medicaid costs after receiving government reimbursement. But those unreimbursed costs as a share of total expenses were similar for nonprofits (2.51%) and for-profits (2.53%), the authors noted.
“Thus, our results suggest that the largest component of community benefit supposedly provided by nonprofit hospitals (i.e., unreimbursed Medicaid costs, net of supplemental payments) is poorly aligned with the (effectively automatic) tax subsidy that these institutions receive,” Bai and co-investigators explained.
The U.S. doesn’t currently require nonprofits to hit certain marks demonstrating value to the community, but the researchers warned that policymakers must do more on this issue. This includes increased transparency surrounding nonprofit subsidies and better linking that financial aid with demonstrable community benefits.
Read the full research letter here.
Matt joined Chicago’s TriMed team in 2018 covering all areas of health imaging after two years reporting on the hospital field. He holds a bachelor’s in English from UIC, and enjoys a good cup of coffee and an interesting documentary.