Major nonprofit hospitals' community spend falls millions short of tax break savings, report says

A photo of a community health worker wearing a mask
The Lown Institute found that the private nonprofit hospitals’ charity and community spending often varied widely within individual cities despite their similar tax rates, community needs and rates of uninsured patients. (Getty/Kemal Yildirim)

Nearly three-quarters of private nonprofit hospitals’ charity spending fails to match the value of their tax exemptions, according to a new Lown Institute report.

Major names like the Cleveland Clinic, New York-Presbyterian Hospital and UCSF Medical Center were the nation’s worst offenders, the Lown Institute said, with these three each posting a $200 million or greater deficit in “fair share spending” during 2018.

Per the report released Sunday, the 10 hospitals with the largest deficits accounted for a total deficit of $1.8 billion below the value of their nonprofit tax breaks, representing more than 10% of the country’s total fair share deficit of nearly $17 billion as calculated by the Lown Institute.

The other end of the spectrum was dominated by safety net public hospitals, several of which the think tank noted fell within New York City’s public hospital system.

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“Hospitals say they want to be great community partners, and the ones at the top of our list have followed through,” Vikas Saini, M.D., president of the Lown Institute. “With the pandemic shining a light on health inequity in America, we need more hospitals to give back as much as they take in tax breaks.”

The institute’s rankings reviewed 3,641 hospitals’ cost report filings with the IRS and the Centers for Medicare & Medicaid Services from 2018 to determine charity care spending and other investments benefiting nearby communities.

For 2,391 private nonprofits, the group leaned on research establishing an organization’s nonprofit tax exemption at 5.9% of its overall expenditure. Hospitals with charity and community spending that reached this threshold were considered to have “spent their fair share,” while those that fell short were said to have a “fair share deficit.”

Nationwide, the hospitals with the largest fair share deficits were:

  • The Cleveland Clinic ($261 million)
  • NewYork-Presbyterian Hospital ($237 million)
  • UCSF Medical Center ($208 million)
  • Massachusetts General Hospital ($179 million)
  • The University of Michigan Health System ($169 million)
  • New York University Langone Medical Center ($163 million)
  • Vanderbilt University Medical Center ($157 million)
  • Brigham and Women’s Hospital ($142 million)
  • Hospital of the University of Pennsylvania ($142 million)
  • Cedars-Sinai Medical Center ($138 million)

The Lown Institute noted that, with the exception of Vanderbilt University Medical Center, each of the hospitals with the greatest fair share deficits were also named to the U.S. News & World Report 2020-2021 Honor Roll.

Across the 72% of total hospitals that spent below their tax exemptions, the deficit ranged from just a few thousand dollars to the hundreds of millions noted above, the group wrote.

RELATED: In many U.S. cities, most and least racially inclusive hospitals are neighbors, Lown Institute says

Topping the rankings of the hospitals that invested the most in charity and community spending were:

  • Paradise Valley Hospital in National City, California
  • Elmhurst Hospital Center in Elmhurst, New York
  • Queens Hospital Center in Jamaica, New York
  • Metropolitan Hospital Center in New York City
  • Woodhull Medical and Mental Health Center in Brooklyn, New York
  • Leonard J. Chabert Medical Center in Houma, Louisiana
  • NYC Health + Hospitals/Coney Island in Brooklyn, New York
  • Lallie Kemp Medical Center in Independence, Louisiana
  • Zuckerberg San Francisco General Hospital and Trauma Center in San Francisco
  • The University Hospital in Newark, New Jersey

The Lown Institute wrote that the hospitals’ relative charity and community spending often varied widely within individual cities despite their similar tax rates, community needs and rates of uninsured patients.

To illustrate the trend, the group highlighted the disparity between Boston Medical Center, which spent 6.6% of its total expenses on charity and community benefits for an $11 million fair share surplus, and Massachusetts General Hospital, which set aside just 1.2% of its total expenses to see a $179 million fair share deficit.

Meanwhile, in New York City, the gap between large private nonprofit hospitals’ community benefit spending was demonstrated by Mount Sinai Beth Israel’s 8.4% of total expense and $25 million fair share surplus and NewYork-Presbyterian Hospital’s 1.9% of total expense and $237 million fair share deficit.