- Despite provisions in the Affordable Care Act that encourage tax-exempt hospitals to provide more community health benefits, new research finds only modest change in such investment.
- Average spending by tax-exempt hospitals on community benefits grew 0.5% between 2010 and 2014 — from 7.6% to 8.1%, according to a study published this week in Health Affairs. However, most of that increase went toward charity care and not broader community health initiatives.
- The recent repeal of the ACA’s individual mandate penalty could slow community benefit investment by creating uncertainty around hospital financials. “It’s a very difficult context in which to operate a stable system,” Jill Horwitz, professor of law at UCLA who specializes in health issues, told Kaiser Health News. “One day to the next, it’s hard to know what the rules are, what the reimbursement is going to be and what kind of insurance your patients will have.”
Under the ACA, hospitals are encouraged to focus on disease prevention in local communities and support efforts to diagnose and manage those populations. The law also requires tax-exempt hospitals to perform community health needs assessments every three years.
The hope was that increased awareness of local health needs, combined with less unreimbursed care due to more people being insured, would lead to more investment in other forms of community benefits, such as health improvement activities, the researchers note. Instead, spending on community health initiatives remained essentially unchanged.
The researchers also found wide variation in the level of community benefit spending among tax-exempt hospitals — with a fivefold difference in mean spending between hospitals in the lowest and highest quartiles of spending and a 20-fold difference at either end of decile spending.
One reason for the small change in community benefit spending could be lack of time, the researchers suggest. The community health needs assessment provisions only took effect in 2012, and the ACA’s insurance expansion got underway in 2014. Still, some hospitals have limited means to invest in community-based programs because of high use of charity care.
“Even if ACA-related expansions of health insurance do help free up financial resources for hospitals to invest in community health, many hospitals may lack the infrastructure and competencies necessary for effectively engaging in community health initiatives,” the study says.
The question how much nonprofit hospitals contribute to their communities in exchange for their tax-exempt status has long been a subject of debate. While for-profit hospitals can depend on investors’ dollars, nonprofits have to demonstrate a community benefit to remain tax-exempt. Yet nonprofits have come under scrutiny for high C-suite salaries and, in some cases, significant revenues.
According to a recent Axios analysis, the nation’s largest nonprofit health systems racked up more than $21 billion in 2016 through Wall Street investments, stocks, bonds, mergers and acquisitions and credit default swaps and accounting gains. The most recent annual reports for 84 of the biggest, most successful systems showed total revenue of $535.5 billion and $14.4 billion in profit, with an operating profit margin of 2.7%.
The American Hospital Association disputes suggestions that nonprofit hospitals are making money off their tax-exempt status. In a recent Ernst and Young analysis requested by the AHA, hospital community health initiatives outweighed the worth of their tax exemption by a factor of 11 to one.