Comparing the Value of Nonprofit Hospitals' Tax Exemption to Their Community Benefits

Research output: Contribution to journalArticle

Abstract

The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association's (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit's total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.

Original languageEnglish (US)
JournalInquiry : a journal of medical care organization, provision and financing
Volume55
DOIs
StatePublished - Jan 1 2018

Fingerprint

Tax Exemption
Charities
Taxes
American Hospital Association
Centers for Medicare and Medicaid Services (U.S.)
Hospital Costs

Keywords

  • community benefits
  • health care policy
  • health economics
  • hospitals
  • nonprofit status

ASJC Scopus subject areas

  • Health Policy

Cite this

@article{f5773abec87f402dbfe563ac9b64610e,
title = "Comparing the Value of Nonprofit Hospitals' Tax Exemption to Their Community Benefits",
abstract = "The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association's (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit's total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9{\%} of total expenses, while total community benefits average 7.6{\%} of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7{\%} of expenses, and incremental charity alone average 1.7{\%} of expenses. The incremental community benefit exceeds the tax exemption for only 62{\%} of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.",
keywords = "community benefits, health care policy, health economics, hospitals, nonprofit status",
author = "Herring, {Bradley J} and Darrell Gaskin and Hossein Zare and Anderson, {Gerard F}",
year = "2018",
month = "1",
day = "1",
doi = "10.1177/0046958017751970",
language = "English (US)",
volume = "55",
journal = "Inquiry",
issn = "0046-9580",
publisher = "Excellus Health Plan",

}

TY - JOUR

T1 - Comparing the Value of Nonprofit Hospitals' Tax Exemption to Their Community Benefits

AU - Herring, Bradley J

AU - Gaskin, Darrell

AU - Zare, Hossein

AU - Anderson, Gerard F

PY - 2018/1/1

Y1 - 2018/1/1

N2 - The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association's (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit's total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.

AB - The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association's (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit's total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.

KW - community benefits

KW - health care policy

KW - health economics

KW - hospitals

KW - nonprofit status

UR - http://www.scopus.com/inward/record.url?scp=85056418607&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85056418607&partnerID=8YFLogxK

U2 - 10.1177/0046958017751970

DO - 10.1177/0046958017751970

M3 - Article

C2 - 29436247

AN - SCOPUS:85056418607

VL - 55

JO - Inquiry

JF - Inquiry

SN - 0046-9580

ER -