Tax-exempt hospitals’ community benefit activities outweigh the value of their federal tax exemption by a factor of nearly eleven to one, according to a new study released by the American Hospital Association (AHA) and Ernst & Young LLP (EY).
Tax-exempt hospitals across the nation, including Delaware’s not-for-profit hospitals, contributed a total of $95 billion in benefits to their communities in 2016 alone (the most recent year for which data is available), while the value of their federal tax exemption was $9 billion in 2016. Clearly, hospitals are investing far more, and communities are reaping a much larger benefit, than would be the case if they were subject to federal taxation.
Improving the health of the community, increasing access to health care services, advancing medical knowledge and reducing the burden on government or other community efforts are all components of community benefit activities. These activities are central to the mission of not-for-profit health systems and are the basis of their tax-exempt status. All of Delaware’s general acute care and pediatric care hospitals are not-for-profits.
Here in Delaware, hospitals contributed more than $348.9 million statewide in community benefit spending in Fiscal Year 2016. More than half ($200.2 million) of this amount stems from the unpaid costs of patient care, including charity care. Delaware hospitals treat all patients who enter their doors, regardless of their ability to pay. In the absence of a public hospital in our state, Delaware hospitals serve as a much-needed safety net. In addition, hospitals nationwide care for millions of patients each year through government health programs such as Medicare, Medicaid, and Tricare. These programs pay hospitals for care at rates well below the actual costs of delivering the care and hospitals absorb those losses as part of their community benefit.
The remaining $148.6 million in community benefit provided by Delaware hospitals includes community health improvement services, such as preventative care and screenings, health profession education and other innovative programs. These innovative programs may include research or other initiatives that may not be directly related to healthcare, but that address unmet community needs. For examples of these programs and to read more on Delaware hospitals’ community benefit efforts, please click here.
Hospitals throughout the nation, and here in Delaware, will continue to invest significant resources in improving the health of those in our communities, inside and outside hospital walls. Indeed, the value of these investments cannot be easily matched.