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The Lown Institute Hospitals Index is the first ranking to examine meaningful community benefit spending for nonprofit hospital systems nationwide. (press release | methodology)
The Institute calculated “fair share spending” for more than 1800 hospitals across 275 nonprofit hospital systems by comparing each system’s spending on charity care and community investment to the value of its tax exemption.
Data sources were hospital tax filings from fiscal year ending 2019, the most recent year available for most hospitals. Information on hospital systems’ CARES Act grant funding and excess revenue were obtained through hospitals’ public audited financial statements.
These 25 nonprofit hospital systems have the largest fair share deficits in the country, meaning their spending on charity care and community investment was less than the value of their tax exemption.
For example, Providence Saint Joseph Health received $705 million more in tax breaks than it spent on charity care and community investment.
*uses FYE 2018 data
These 25 nonprofit hospital systems have the largest fair share surpluses, meaning their spending on charity care and community investment exceeded the value of their tax exemption.
For example, Memorial Hermann Healthcare System spent $147 million more on charity care and community investment than it received in tax breaks.
Fair share deficit, surplus, and total fair share spending for nonprofit hospitals by state. Higher overall ranking indicates greater fair share spending.
Hospital systems with high fair share deficits that also received millions in CARES Act grants in 2020 and ended the year with excess revenue.
*Includes both operating and nonoperating income
The Lown Institute calculated “fair share spending” for 275 private nonprofit hospital systems by comparing each system’s spending on charity care and community investment to the estimated 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.
Spending on charity care and community investment was retrieved from hospitals’ IRS Schedule H Form 990. For spending on community investment, we include a subset of community benefit categories reported to the IRS that provide a direct benefit to community health:
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.
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. While charity care spending reflects the amount patients would pay absent of hospital policy, Medicaid shortfall does not convey a hospital policy choice.
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.
Media inquiries should be directed to Aaron Toleos, vice president of communications for the Lown Institute, at firstname.lastname@example.org.