Lown Index Community Benefit metric

The Lown Hospitals Index measures community benefit performance for 3,641 nonprofit, public, and for-profit hospitals. This ranking is based on three elements: Charity care, Medicaid revenue, and community investment. All three were weighed equally to create the Community Benefit score. For hospitals with data for only two of the elements available, those two were weighed equally to create the Community Benefit score.

Charity care & Medicaid

Charity care, or financial assistance, is free or discounted care. We measured charity care as a share of total expenses using the Centers for Medicare and Medicaid’s Hospital Cost Reports (HCRIS) from 2018.

Medicaid patient revenue was measured as a proportion of total patient revenue using HCRIS data from 2018. 

Community investment

Hospital spending on community investment, as a share of total expenses, was calculated using 2018 IRS data. For hospitals that filed with multiple hospitals as one tax entity, each individual hospital’s spending was estimated by prorating based on each hospital’s share of system revenue. 

For spending on community investment, we include a subset of community benefits reported to the IRS that provide a direct benefit to the community:

• Subsidized health services, such as free clinics, some emergency services, telehealth services, and other services provided at a loss to the hospital;
• Community health improvement activities such as health fairs, community health education classes, immunizations, interpreter services;
• Contributions to community groups;
• Community building activities, which are activities that address the social determinants of health, such as affordable housing, food assistance, and environmental initiatives.

Excluded categories

The IRS categories of Medicaid shortfall, health professions education, and research were not included. Health policy experts have argued that these categories do not constitute direct benefits for community health, and have pointed out reporting inconsistencies that impact the accuracy of the data. 

Medicaid shortfall was not included because hospitals are already reimbursed for Medicaid patients by the state. Hospitals offer discounted rates for most insured patients, yet these are not considered community benefits; it is unclear why discounts for Medicaid patients should be an exception. Additionally, the payments hospitals receive as Disproportionate Share Hospitals are not always reported on Form 990, which can impact the accuracy of reporting. Rather than using Medicaid shortfall as a proxy for hospitals’ inclusion of Medicaid patients, we instead measured the proportion of patient revenue from patients insured through Medicaid. 

Hospital spending on health professions education and research were not included because these investments do not have a direct impact on the health of its community. The labor hospital trainees provide helps hospitals provide patient care, but their work is not targeted toward particularly underserved patients or specialties. Additionally, hospitals are already reimbursed for trainees. Many hospitals do not report on Form 990 the indirect medical education (IME) payments they receive from Medicare for training residents, even though these payments are often greater than the cost of inpatient care. While research funding is a public good, it is unlikely that a hospital’s self-funded research has a direct impact on the health of the surrounding community. 

Fair share spending

For 2,391 private nonprofit hospitals, the Lown Institute calculated “fair share spending,” by comparing each hospital’s spending on charity care and community investment to the value of its tax exemption.

Hospitals that dedicated at least 5.9 percent of overall expenditures to charity care and meaningful community investment were considered to have spent their fair share. The 5.9 percent threshold is based on established research into the valuation of the nonprofit tax exemption.