The hospital interest group's findings include several categories of spending that are not considered community benefits by the IRS, such as operating losses on Medicare beneficiaries and unpaid bills by patients who would have qualified for free or discounted care if they had completed the application, the AHA report says.
Officials with the AHA have long argued those expenses should be counted toward the “community benefit” work that not-for-profit hospitals are required to perform in order to justify their exemptions from taxes.
“This report demonstrates that hospitals are not only meeting but are exceeding the community benefit obligations conferred by their tax exempt status,” AHA President and CEO Richard Umbdenstock said in statement accompanying the report, compiled by Ernst & Young based on information from roughly 900 hospitals.
Some states mandate specific spending levels that hospitals must meet to qualify for tax exemptions, but the federal government has no such standard. Although federal officials several years ago studied the idea of mandating hospitals devote 5% of their expenses toward providing free care to the poor, one of the idea's leading proponents, Sen. Charles Grassley (R-Iowa) has since abandoned it.
The Modern Healthcare analysis from December—which included tax-form data from 1,807 systems and hospitals—found that the median hospital devoted 1.52% of expenses to charity care, and another 3.02% for Medicaid patients whose costs of care were not covered by their respective state programs, for a median total of 4.54% of expenses devoted to means-tested care.
The AHA study found that the average—not median—figure for the same means-tested care was 5.7%, according to their analysis of hospitals tax forms.