In 2009, for the first time, hospitals were required to fill out Schedule H to document their community benefits. Carlson and Evans looked at 156 Form 990s and Schedule Hs from 20 large health systems that were among the first to face a filing deadline. The analysis looked at tax year 2009.
The results were not entirely flattering to hospitals. On average, each hospital devoted 2.5% of all its expenses to providing charity. Once losses on Medicaid and other subsidies for other services were included, the figure rose to 8.3%. Overall, nine out of 10 respondents failed to provide enough free and discounted care to earn tax breaks under a proposal from Sen. Chuck Grassley (R-Iowa) that would have forced hospitals to devote 5% of their expenditures to subsidized care for the poor.
Grassley has loudly criticized tax-exempt hospitals over the years for what he sees as a lack of commitment to charity care in return for those tax breaks.
And of 113 profitable hospitals surveyed, 58.4% provided less-than-average charity care.
Hospitals contend that Schedule H is flawed and fails to measure the value of many medical services key to the health of citizens. (To read more on this subject, see a letter to the editor by AHA President and CEO Richard Umbdenstock, p. 25.)
Maybe so, but it's worth noting that until 1969, the Internal Revenue Service required not-for-profit hospitals to provide charity care for the working poor and indigent to qualify for tax-exempt status. After Medicare and Medicaid began covering many of these patients, hospitals convinced policymakers that few people would need such care. The IRS has not formally required charity care since then as long as hospitals provide benefits to the community in other ways, including health screenings, emergency care, research and medical education. Over the years, critics have argued that more of the billions reaped from tax exemptions should be devoted to helping people who can't afford care. They point to sometimes lavish spending by these institutions on a variety of items, including executive salaries.
Here are some points to keep in mind for the future. There will be growing pressure to provide care for the millions rendered unemployed or underemployed and thus without health coverage by the Great Recession. (That's on top of the millions who were previously uninsured.) Their status appears at this point to be permanent with no significant improvement in sight because of fundamental problems with the economy. The major provisions of the reform law passed a year ago won't take effect until 2014. When they do, according to estimates, we will reach near-universal, but not total, coverage. Millions may still need coverage. And that's if the law survives numerous Republican challenges and review by an ideologically driven and legally creative U.S. Supreme Court.
And now that the Schedule Hs are becoming publicly available, hospital executives are likely to be getting inquiring calls not just from Modern Healthcare, but from their local newspapers and community groups.