Attacks on nonprofits' tax exemptions 'short-sighted'

Recent attempts by state and local governments to reduce tax exemptions for nonprofit hospitals--or in some cases even to take away their nonprofit status--are "short-sighted" and hurting those hospitals' ability to provide care that cities and states rely upon, says Greg Pope, vice president of philanthropy for Saint Thomas Health Services Foundation in Nashville, Tenn., and chair of the Association for Healthcare Philanthropy (AHP) in Washington, D.C. Failure to consider the long-term results of these actions could be a problem given that 60 percent of all community hospitals operate as nonprofits, and 23 percent of community hospitals are owned by state and local governments , adds AHP President and CEO William McGinly.

Many lawmakers don't have a clear understanding of exactly how nonprofits help their communities, says McGinly. "Unfortunately, many Americans and their political leaders are uneducated about the definition of community benefit and equate it to charity or indigent care alone."  

Charity care "is far too narrow a definition of community benefit," says Pope. "... [T]he grounds for tax exemptions earned by nonprofit health organizations range far beyond care for the indigent."

 According to the Alliance for Advancing Nonprofit Health Care, community benefits provided by nonprofits include:

  • Offering services at no fee or a discounted fee to uninsured, under-insured, low-income or medically indigent patients.
  • Providing unprofitable services, including trauma care, burn care and outreach to primary care and preventive services.
  • Undertaking communitywide health planning efforts.
  • Providing medical education and research.
  • Conducting community development projects (e.g., to improve housing, jobs or adolescent education).
  • Donating to other community nonprofits.

AHP's most recent "Report on Giving" supports the notion that nonprofits have a much wider range of charitable giving than indicated by what is defined as charity care. Slightly more than 6 percent of the $8.6 billion raised by healthcare nonprofits in fiscal year 2008 supported charity care. However, 25 percent was spent on construction and renovation, 20 percent on new equipment purchases, 16 percent on general hospital operations, 12 percent on other community benefit programs, and 5 percent on research and teaching.

To learn more:
- read the AHP press release
- read this Healthcare Financial News article