NYC Nonprofit Hospitals Saw High Tax Breaks, Low Community Investments

New York City nonprofit hospitals had a fair share deficit of $727 million in 2019, with nine major facilities spending less on community investments than they received in tax breaks, according to a report from the Lown Institute.

In exchange for being exempt from most federal, state, and local taxes, nonprofit hospitals must provide free and discounted care to their communities and invest in community health improvements.

Researchers assessed community benefit spending for 21 private nonprofit hospitals in New York City and compared it to the value of their tax exemption to determine the hospitals’ fair share spending.

Community benefit spending is reported in IRS Form 990 Schedule H and includes financial assistance, community health improvement activities, contributions to community groups, community building activities, and subsidized healthcare services.

Researchers calculated the value of tax exemption by measuring exemptions for federal income tax, state corporate income tax, state and local sales tax, and property tax, along with tax-exempt bonds and tax-exempt charitable donations.

The report found that New York City nonprofit hospitals spent $1.1 billion on community investment in 2019, while the value of their tax exemptions amounted to $1.5 billion. On average, hospitals spent $52 million on community benefits and received $71 million in tax breaks.

Nine hospitals spent less on their communities than they received in tax breaks, indicating a fair share deficit. Among these nine hospitals, the average fair share deficit was $81 million, and the median deficit was $25 million.

The total fair share deficit for New York City hospitals was $727 million. New York-Presbyterian Hospital accounted for almost half of this total, with a deficit of $359 million. New York-Presbyterian Hospital, NYU Langone, and Mount Sinai made up 85 percent of the city’s total deficit.

The nine hospitals with fair share deficits included:

New York-Presbyterian Hospital - $359 million

New York University Langone Medical Center - $167 million

Mount Sinai Hospital - $98 million

New York-Presbyterian/Brooklyn Methodist Hospital - $43 million

Staten Island University Hospital - $25 million

Mount Sinai St. Luke’s Roosevelt Hospital - $25 million

Wyckoff Heights Medical Center - $4.3 million

New York-Presbyterian/Queens - $3.7 million

Brooklyn Hospital Center – Downtown Campus - $1.6 million

The $727 million fair share deficit could triple what New York City spends on school meals annually, create thousands of affordable housing units, or pay off medical debt for every patient sued by a New York hospital over the past five years, the report noted.

The other twelve nonprofit hospitals had fair share surpluses, meaning they spent more on their communities than they received in tax breaks. However, the hospital with the highest surplus—Montefiore Medical Center—had a surplus of just $76 million. The total fair share surplus was $292 million, less than half of the total deficit.

The report’s findings indicate the need for policies that improve transparency and accountability around nonprofit tax exemptions and incentivize community benefit spending.

Researchers suggested that policymakers utilize state reporting requirements to encourage transparency, leverage the certificate of need (CON) process, and consider establishing minimum levels of community benefit spending for nonprofit hospitals.