Provision of Community Benefits by Tax-Exempt U.S. Hospitals

In this analysis of IRS reports filed by tax-exempt hospitals, wide variation was observed in spending on community benefits (hospitals in the top decile spent 20% of operating expenses, and those in the bottom, 1%). Most spending was for unreimbursed costs of patient care. A long-standing policy issue in the United States concerns tax exemption for nonprofit hospitals. Almost all such hospitals are exempt from income, property, and sales taxes on the basis that they qualify as charitable organizations. 1 – 3 Although federal, state, and local standards for defining a charitable organization differ in many cases, there is a general expectation that tax-exempt hospitals will benefit their communities by providing services and otherwise engaging in activities that they fully or partially subsidize. However, the question of whether tax-exempt hospitals provide appropriate levels of community benefits has generated considerable controversy. At the local level, a number of . . .