The hospital industry represents nearly $1 in every $3 spent on healthcare, largely tax-exempt. Community Benefit policy enables this exemption, but who actually benefits? Reforming the program will create more transparency and achieve better health outcomes for patients and the community. Learn how.
by Loren Anthes / October 10, 2022
Excerpts from the article:
- The hospital industry, developed through governmental investment, represents nearly 1 in 3 dollars spent on healthcare and is largely tax exempt
- Community Benefit policy, which enables this exemption, has evolved over time, but the impact is minimal and the value creates perverse incentives
- State and local governments should reform the program to create more transparency and effectiveness in achieving better health outcomes
The birth of the modern hospital industry
In 1946, the 79th United States Congress passed the Hospital Survey and Construction Act, commonly known as the Hill-Burton Act, sponsored by Senator Harold Burton of Ohio and Senator Lister Hill of Alabama. The legislation was partly a response to the combination of market forces stemming from the industrial revolution and World War II, where the advent of health coverage became an important outgrowth of the labor movement, and employer benefits became normalized at a time of wage freezes. With the scarcity of hospital services nationally, the legislation intended to increase the number of “beds”, with particular focus on areas with little medical access or high concentrations of poverty. The program itself lasted until 1997.
“Just in terms of total expenditures, hospitals represent about 31 percent of all health spending.”
When looking at the data, the legislation was effective. In 1948, 22 percent of counties had no hospital beds, and the total number of facilities was 4,375. By 1975, there were 5,875 hospitals (a 34 percent increase), and over 70,000 additional beds were created, particularly in impoverished parts of the United States, notably the southeast.
As hospitals developed in communities, so did their relationship with the community. Often, hospitals frame this relationship where the hospitals as an “anchoring” institution, wherein the facility acts as an economic and organizing center for the communities they serve. Indeed, hospitals and healthcare are a significant industry in Ohio, with over 780 thousand employees (including 67,500 in Cleveland hospitals alone) and are often the main driver of local economies as we have documented previously in our research, “Big City Problems in Ohio’s Small Towns.”
“The average nonprofit hospital chief executive makes over $600 thousand per year, with the top 10 making more than $7 million.”
Community benefit creates a deficit
The community benefit standard established by the ACA requires several activities of hospitals that are largely documented in schedule H of their IRS filing and enables hospitals to avoid paying over $60 billion in property taxes annually.
The law also established Community Health Needs Assessments (CHNAs), which must be conducted every three years. These processes, which require hospitals to document the qualitative and quantitative health needs of their service areas, must be tied back to the spending associated with the community benefit reporting of the hospital and be publicly posted.
LFC Comments: We highly suggest you take the time to read the entire article.