Tax Breaks Exceeded Charity Care Spending for Nonprofit Hospitals

Nonprofit hospitals received more in tax breaks than they spent on charity care in 2020, with the combined fair share deficit totaling $14.2 billion, according to a report from the Lown Institute.

The Lown Institute used hospitals’ 2020 IRS Form 990 to calculate fair share spending for 1,773 private nonprofit hospitals by comparing the estimated value of their tax exemptions to the amount they spent on financial assistance and community investment.

More than 1,350 hospitals spent less on charity care and community investments than they received in tax breaks and thus had fair share deficits. The total fair share deficit of $14.2 billion was enough to relieve the medical debt of 18 million Americans or prevent 600 at-risk hospitals from closing, the report noted.

“Americans desperately need hospitals to use their billions in tax breaks as intended: to promote health while relieving the problems of medical debt and access to care,” Vikas Saini, MD, president of the Lown Institute, said in a press release. “These are charitable organizations and they should do a better job at prioritizing social responsibility over profitability.”

Many of the hospitals with fair share deficits received millions of dollars in COVID-19 relief funding and ended the year with high net incomes.

UPMC Presbyterian in Pittsburgh, PA, had the largest fair deficit in the country at $246 million. The facility received $56 million in COVID-19 relief funding and ended the year with a net income of $44 million. The fair share deficit could have erased over 167,000 medical debts in the state or prevented 248 rural hospitals from closing.

NYU Langone Hospitals in New York, NY, and Vanderbilt University Medical Center in Nashville, TN, followed with fair share deficits of $173 million and $158 million, respectively.

Other hospitals and their fair share deficits included:

•  Hospital of University of Pennsylvania (Philadelphia, PA) $151 million
• Indiana University Health (Indianapolis, IN) $136 million
• Spectrum Health Butterworth Campus (Grand Rapids, MI) $134 million
• Cedars-Sinai Medical Center (Los Angeles, CA) $126 million
• M Health Fairview University of Minnesota Medical Center (Minneapolis, MN) $119 million
• Umass Memorial Medical Center (Worcester, MA) $114 million
• Arizona General Hospital Mesa (Mesa, AZ) $102 million.

In Massachusetts, Minnesota, Rhode Island, and Washington, DC, the total fair deficit for all hospitals was enough to erase all medical debt on credit reports in each state or district. In 41 states, the total fair share deficit for all hospitals was enough to cover the net losses of all rural hospitals in the state in 2020.

For example, Pennsylvania had six rural hospitals with losses in 2020 that totaled $39 million. Meanwhile, the total fair share deficit in the state was $1.65 billion.

Not all nonprofit hospitals failed to meet their community investment requirements. Among hospitals that spent more on charity care than the value of their tax exemption, New York Presbyterian Hospital had a fair share surplus of $117 million, Nebraska Medical Center had a surplus of $116 million, and Stanford Health Care had a surplus of $92 million.

The American Hospital Association (AHA) has pushed back against these findings, saying the Lown Institute’s report is “wrong and cannot be taken seriously as it once again relies on obvious biases and suffers from serious methodological flaws.”

The group said that the report cherry-picks categories of community investment and ignores other important areas, including researching life-saving treatments and cures and training and educating future doctors and nurses.

Additionally, the report ignores the substantial financial challenges hospitals and health systems have been facing during the pandemic and does not account for the significant decreases in patient volumes in 2020, according to AHA.

The report also does not acknowledge that financial assistance is only one part of a hospital’s total community benefit, nor does it mention that hospitals subsidize the high cost of essential services they provide to their communities.

AHA referenced two analyses, one of which found that for every one dollar in tax exemption, hospitals provided nine dollars of community benefit. The other showed that tax-exempt hospitals provided more than $110 billion in community benefits in fiscal year 2019, the most recent year data was available.

“We welcome a discussion about the many benefits hospitals provide to their communities, but relying on obvious bias, fuzzy math and dubious conjecture undermines efforts to improve access to high-quality care for all Americans,” the group wrote.

Editor’s note: This article was updated on April 13, 2023, to include a response from the American Hospital Association. The original version of this article was published on April 11, 2023.