AHA: Hospitals spend 11.3% on community benefits

With nonprofit hospitals trying to prove they deserve tax exemptions, comes a new report showing an average of 11.3 percent of their total spending goes toward community benefits, including free care, community health improvement programs and subsidized services.

On average, hospitals devoted 5.7 percent of their total expenses on direct benefits to financially struggling patients, such as spending to cover Medicare underpayments, according the report by Ernst & Young, based on Schedule H tax forms required as of 2009.

According to those figures, a hospital that reported $100 million in total operating costs spent an average of more than $11 million on benefits to the community, with roughly $6 million for patients in financial need, the AHA noted.

The report found that more than 70 percent of hospitals included bad debt expense due to charity care on their Schedule H forms at 0.4 percent of total spending or an average $1.6 million per hospital.

The report also emphasized that hospitals do more for their communities outside of charity care. They finance health improvement programs, health professions education and medical research, as well as give cash and in-kind donations to community groups.

Moreover, the report cautions that Schedule H filings fail to completely measure the tangible and intangible benefits of hospitals improving their communities' health and well-being.

"Dollars alone can never tell the complete story of how communities benefit from programs and services that hospitals provide," AHA President and CEO Rich Umbdenstock said yesterday. "The AHA believes that communities themselves are in the best position to determine whether the benefits provided by their local hospitals match their needs."

To learn more:
- read the AHA press release (.pdf)
- here's the report (.pdf)