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From Health Affairs:


US Nonprofit Hospital Tax Exemption Almost Doubles Between 2002 And 2011



Bethesda, MD -- Since the 1950s, the Internal Revenue Service (IRS) has permitted non-profit hospitals to qualify as charitable tax-exempt organizations, allowing them to receive donations and, as a rule, be exempt from federal and state corporate taxes as well as state and local sales and local property taxes.  In exchange, they must provide charity care to patients unable to pay, and proactively engage in activities that benefit their communities.  A new study, released by Health Affairs as a Web First, estimates the total value of the exemption to US nonprofit hospitals in 2011 at $24.6 billion. This compares to the congressional Joint Committee on Taxation's $12.6 billion estimate for 2002.  The authors found considerable variation in tax benefits by state, driven by several factors, including differences in state tax policy.  Another important study finding: according to recent IRS estimates, only 8 percent of the $62 billion that the hospitals spent in 2011 for community benefits went to community health improvements. By contrast, hospitals allocated the single greatest proportion of their community benefit expenditures -- one-third of all community benefit spending -- to offset what they reported as Medicaid "shortfalls."

The Value Of The Nonprofit Hospital Tax Exemption Was $24.6 Billion In 2011


By Sara Rosenbaum, David A. Kindig, Jie Bao, Maureen K.Brynes, and Colin O’Laughlin


Rosenbaum and Byrnes are with the George Washington University in Washington, DC; Kindig is an emeritus professor at the University of Wisconsin-Madison; and Bao and O’Laughlin are affiliated with Avalere Health, also in Washington, DC.


This study, also to appear in the July issue of Health Affairs, was supported by the Robert Wood Johnson Foundation.


For the study, the authors identified 2,980 private nonprofit hospitals.  The primary sources for the data were the 2011 cost reports from the Healthcare Cost Report Information System (HCRIS) maintained by the Centers for Medicare and Medicaid Services (CMS) and the hospitals' 2011 Form 990s, maintained by the IRS and available to the public. "The Affordable Care Act (ACA) requires tax-exempt hospitals to engage in communitywide planning efforts to improve community health," observed the authors.  "We hope that as the ACA's insurance reforms continue to take hold, the resulting reductions in uncompensated care will lead hospitals to increasingly expand their mission to include community health improvement."

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically at The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a one-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.