AHA: Tax-exempt hospitals gave $105B in community benefits such as financial assistance in 2018

Patients in a hospital waiting room
Tax-exempt hospitals spent $105 billion in community benefits in 2018 that include covering Medicare shortfalls and making workforce improvements. (Getty/SuwanPhoto)

Tax-exempt hospitals provided $105 billion in community benefits that range from financial assistance to erasing medical debt in 2018, a new analysis finds.

The analysis released Thursday by the American Hospital Association also showed that hospitals in the 340B drug discount program devoted nearly $68 billion in community benefits the same year. The finding comes as drugmakers have restricted access to 340B products due to concerns that discounts do not benefit the patient.

“Today’s analysis demonstrates that improving the health of their communities remains at the heart of the mission of America’s hospitals and health systems,” said AHA President and CEO Rick Pollack in a statement.

Hospitals are required to report to the federal government their community benefit activities in exchange for their tax-exempt status.

An analysis of the community benefit activities from 2018, the most recent year available, showed that 2,791 tax-exempt hospitals spent nearly 14% of their annual expenses on the benefits.

The most common community benefit was financial assistance, which made up 10.3% of their expenses. The second biggest benefit was 3.3% to tackle Medicare reimbursement shortfalls, which occur when the federal government’s reimbursement is below the actual costs for treating Medicare patients. Other benefits include 0.4% on tackling bad debt and 0.1% on community-building activities that include environmental improvements and workforce development.

“These are the financial costs hospitals incurred in providing particular benefits to their community, but do not reflect all the tangible and intangible benefits of improving their communities’ health and well-being,” the analysis said.

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AHA noted that 340B tax-exempt hospitals provided nearly $68 billion in community benefits in 2018.

The analysis does not focus on the impact of the pandemic, but Pollack said that facilities have “cared for their patients and communities in times of an unprecedented public health crisis, providing essential services and saving likes during a pandemic.”

The 340B program has been the center of an escalating feud between hospitals and the pharmaceutical industry.

Several major drugmakers including Merck and Eli Lilly have restricted sales of 340B-discounted products to contract pharmacies, third-party entities that dispense the products on behalf of covered entities.

Drugmakers have argued that not enough of the discounts on the products benefit the patient, but 340B-covered entities argue that the program is vital as prices have surged and they operate on thin margins.

The federal government has called for the drug companies to halt their restrictions but several have sued in response.