Nonprofit Hospitals Saw High Tax Breaks, Low Charity Care Spending

Most nonprofit hospital systems spent less on charity care and community investments than they received in tax breaks, with total fair share deficits amounting to $18.4 billion in fiscal year 2019, according to a report from the Lown Institute.

The report included spending from more than 1,800 hospitals across 275 nonprofit health systems. Researchers calculated the spending based on data from FY 2019 hospital tax filings.

Nonprofit health systems are exempt from paying federal, state, and local property taxes. In return, the organizations must invest their profits in charity care and community initiatives.

Out of the 275 nonprofit hospital systems, 227 had fair share deficits—the difference between tax breaks and investment in charity care—and spent less on community investments than their tax exemption estimated value.

The hospital with the most significant fair share deficit in the country—Providence Saint Joseph Health—received $705 million more in tax breaks than it spent on community investments and charity care, the report found.

The following hospitals and their fair share deficits comprised some of the largest fair share deficits in the country:

• Trinity Health - $671 million
• Mass General Brigham - $625 million
• The Cleveland Clinic Health System - $611 million
• University of Pittsburgh Medical Center (UPMC) - $601 million
• University of Pennsylvania Health System - $571 million
• Catholic Health Initiatives $515 million
• Advocate Aurora Health - $498 million
• Dignity Health - $456 million
• Ascension Health - $388 million

Along with Providence Saint Joseph Health, these nine hospitals accounted for $5.6 billion, or 30 percent, of the $18.4 billion total fair share deficit.

In seven states, including California, Pennsylvania, New York, Ohio, Illinois, Michigan, and Massachusetts, the total fair share deficit for all nonprofit hospitals exceeded $1 billion, the report noted.

“Would half a billion in taxpayer dollars be better spent by directly funding addiction, food insecurity, or homelessness efforts?” Vikas Saini, MD, president of the Lown Institute, said in a press release. “We should all be asking those types of questions given the vastness of these sums and the significant public health crises many communities are facing.”

The report also noted a handful of nonprofit hospitals with high fair share deficits that received millions in funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020 and ended the year with excess revenue.

Researchers used hospital public audited financial statements to determine CARES Act funding and excess revenue amounts.

Cleveland Clinic Health System, which received $611 million more in tax breaks than it invested in charity care and community initiatives, received $424 million in CARES Act funding during 2020. The health system ended the year with $1.3 billion in excess revenue.

UPMC, which had a fair share deficit of $601 million, received a substantial $761 million in CARES Act grants and ended 2020 with $1.1 billion in excess revenue.

Mercy Health, a health system with a fair share deficit of $249 million, received $427 million in CARES Act funding, ending the year with $609 million in excess revenue, the report found.

“At the end of the day, some of these hospital systems are walking away with over a billion in government funds,” Dr. Saini added. “Taxpayers should be seeing a better return on their investments and demanding greater accountability.”

However, some nonprofit hospitals saw fair share surpluses, meaning that their spending on charity care and community investment exceeded the value of their tax breaks.

The following five hospitals had the largest fair share surpluses in the country:

• Memorial Hermann Healthcare System - $147 million
• Wellstar Health System - $144 million
• The Nebraska Medical Center - $108 million
• Christus Health - $93 million
• Houston Methodist - $80 million

After accounting for fair share deficit and fair share surplus amounts among all nonprofit health systems, Texas and Maryland ranked the highest for fair share spending, seeing a positive of $606 million and $83 million, respectively.

Meanwhile, Pennsylvania had the most significant negative fair share spending amount at -$2,060 million, and New York followed with -$1,649 million.

The report findings coincide with past data from the Lown Institute based on 2018 tax filings, revealing that 72 percent of nonprofit hospitals spent less on community investments than they received in tax breaks.

However, hospital groups, including the American Hospital Association (AHA) disagreed with the findings.

“The report cherry-picks categories of community investment while simply ignoring others, such as researching life-saving treatments and cures and training and educating the next generation of caregivers. It overlooks many of the essential contributions hospitals make to their communities that are critically important, especially during the pandemic,” AHA said in a statement.

“For example, a number of hospitals invested considerable funds and expertise into developing COVID-19 tests after setbacks from public health agencies. Hospitals also expanded treatment capacity especially as COVID-19 cases surged, established vaccine clinics, and launched outreach campaigns to ensure everyone has access to vaccines, to name just a few examples.”

4/13/2022 This story has been updated to include a statement from AHA