Tax exemption worth $24.6B to hospitals in 2011

The nationwide value of tax exemptions for non-profit hospitals has been calculated at $24.6 billion in 2011, nearly double what it was in 2002, according to a new study in the journal Health Affairs.

Adjusted for constant 2011 dollars, the study concluded that the net tax exemption benefit climbed 57 percent over the past decade.

The study, which was conducted by researchers from George Washington University, the University of Wisconsin and Avalere Health, reached that calculation in part by examining the bottom line benefit of those exemptions compared to the sums spent on community health benefits.

Altogether, the study concluded that non-profit hospitals reaped $551 billion in net patient revenues and $417 million in net income from providing patient services. Half of the more than 2,900 hospitals scrutinized reported losses in 2011 and therefore would have had no tax liability. But among those operating in the black, the profit was $22 billion. As a result of their status, federal and state tax liabilities of $7.5 billion were avoided, according to the study.

Another $3.3 billion in exemptions were granted to investors in tax-exempt hospital bonds. Hospitals also received $10.5 billion in charitable contributions that would have a tax value of about $3.4 billion. Another $6.1 billion was enjoyed in state and local sales tax exemptions, along with $4.3 billion in property tax exemptions.

California hospitals enjoyed a tax exemption benefit exceeding $3 billion in 2011, and hospitals in nine other states had exemptions exceeding $1 billion.

Community benefits have long been a sore point with not-for-profit hospitals. While some hospitals report additional data, in California, labor unions pressure hospitals to provide clearer definitions of their community benefits.

While researchers concluded that hospitals furnished $62 billion in community benefits in 2011, they wrote that "92 percent of these expenditures (more than $57 billion) supported hospital activities such as financial assistance for indigent patients, unreimbursed Medicaid costs, health professions training, and research."

"These are companies that are being insulated from the marketplace (and that) makes them more inefficient, and the taxpayers are financing them to do it," Joe Antos, of the American Enterprise Institute, told the Washington Post.

Nevertheless, the American Hospital Association focused on the total value of those benefits, and told the Washington Post that hospitals "are not only meeting, but are exceeding, the community benefit obligations conferred by their tax-exempt status."

To learn more:
- read the Health Affairs study 
- check out the Washington Post article

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