AHA says hospitals devote 11.3% of expenses to community benefit
U.S. tax-exempt hospitals devoted an average of 11.3% of their expenses to benefitting their communities, based on an analysis of disclosures the Internal Revenue Service required for the first time in 2009, according to the American Hospital Association. An exclusive analysis by Modern Healthcare (Dec. 19, 2011, p. 6) using the same kinds of not-for-profit hospital tax forms found that the median healthcare provider devoted 5.87% of its total expenses to providing community benefits, using the narrower definition of “community benefit” espoused by the Internal Revenue Service. The AHA’S findings include categories of spending that are not considered community benefits by the IRS, such as operating losses on Medicare beneficiaries and unpaid bills by patients who would have qualified for free or discounted care but didn’t apply for it. AHA officials have long argued those expenses should be counted toward the “community benefit” work that not-for-profit hospitals are required to perform in order to justify their exemptions from taxes. “This report demonstrates that hospitals are not only meeting but are exceeding the community benefit obligations conferred by their tax-exempt status,” AHA President and CEO Richard Umbdenstock said in statement accompanying the report, compiled by Ernst & Young based on information from roughly 900 hospitals. The Modern Healthcare analysis—which included tax-form data from 1,807 systems and hospitals—found that the median hospital devoted 1.52% of expenses to charity care, and another 3.02% for Medicaid patients whose costs of care were not covered by their respective state programs, for a median total of 4.54% of expenses devoted to means-tested care. The AHA study found that the average—not median—figure for the same means-tested care was 5.7%, according to their analysis of hospitals tax forms.