Skip to main content
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HLTH 2024
    • Sponsored Content: Vital Signs Blog
  • Opinion
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • 40 Under 40
    • Best Places to Work in Healthcare
    • Healthcare Marketing Impact Awards
    • Innovators Awards
    • Diversity Leaders
    • Leading Women
    • Best in Business Awards
    • The 2030 Playbook Conference
    • Innovations in Patient Experience
    • Leading Women Conference & Awards Luncheon
    • Leadership Summit
    • Workforce Summit
    • Best Places to Work Awards Gala
    • Diversity Leaders Gala
    • - Looking Ahead to 2025
    • - Financial Growth
    • - Hospital of the Future
    • - Value Based Care
    • - Looking Ahead to 2026
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Skilled Nursing Facilities
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
    • Sponsored Content
MENU
Breadcrumb
  1. Home
  2. Providers
April 05, 2014 12:00 AM

Time for a new test on hospitals' tax exemptions

Bruce McPherson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    As of last year, not-for-profit hospitals are required under the Patient Protection and Affordable Care Act to meet new tax-exemption reporting requirements on their policies and practices in four areas: community health needs assessment; patient financial assistance; billing and collections; and emergency-care pricing.

    Unfortunately, this is the wrong way for tax-exempt hospitals to demonstrate their performance in providing special benefits to their communities.

    First, these four areas are far from the only important community-benefit considerations for a hospital's board and management. Other critical issues include defining the roles of the board and CEO in planning, budgeting, implementing, evaluating and reporting on community-benefit programs and activities; determining the qualifications and organizational placement of one person responsible for day-to-day coordination of community-benefit programs across the organization; and incorporating community-benefit objectives into executive incentive pay arrangements—just to name a few.

    Second, and more important, the current reporting requirements represent a form of micromanagement by the federal government, focusing on process rather than results. They fail to address the fundamental public policy question: Is each not-for-profit hospital doing enough to justify its tax exemption?

    In June 2013, the New England Journal of Medicine reported on a study that begins to address this question. The data were derived from the Internal Revenue Service Form 990s for tax year 2009 from 1,800 of the 2,900 not-for-profit hospitals in the U.S. (The other 1,100 not-for-profit hospitals were part of systems not required to report their individual facility information). While the study found that the hospitals on average devoted 7.5% of their total operating expenses to community benefits (excluding bad debt and any Medicare payment shortfalls), on the high end, hospitals averaged 20% of total operating expenses, and the lowest averaged only 1%. These variations can be explained only in part by differences in these hospitals' earnings, as determined in a more recent study conducted by the same primary researchers.

    Rather than ignoring these unexplained variations, Congress and not-for-profit hospital leaders should work together to establish a fair and simple financial test comparing each hospital's community-benefit investments to the estimated value of its federal income tax exemption. Such an approach would take into consideration each organization's financial status while getting at the right public policy question.

    Bruce McPherson is president and CEO of the Alliance for Advancing Nonprofit Health Care, Washington.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    mh-20250508-post-acute-care
    Post-acute providers see hiring boost as possible recession looms
    Cleveland-clinic-for web_i.jpg
    Cleveland Clinic, Regent Surgical form ASC joint venture
    Most Popular
    1
    Here are new state healthcare laws taking effect in 2025
    2
    Meet Modern Healthcare's 2025 Leading Women
    3
    New York-Presbyterian layoffs affect 2% of employees
    4
    Evernorth, Optum, CenterWell units buoyed insurers in Q1
    5
    Epic CEO Judy Faulkner on AI, antitrust and consolidation
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HLTH 2024
      • Sponsored Content: Vital Signs Blog
    • Opinion
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • 40 Under 40
        • Best Places to Work in Healthcare
        • Healthcare Marketing Impact Awards
        • Innovators Awards
        • Diversity Leaders
        • Leading Women
        • Best in Business Awards
      • Conferences
        • The 2030 Playbook Conference
        • Innovations in Patient Experience
        • Leading Women Conference & Awards Luncheon
        • Leadership Summit
        • Workforce Summit
      • Galas
        • Best Places to Work Awards Gala
        • Diversity Leaders Gala
      • Virtual Briefings
        • - Looking Ahead to 2025
        • - Financial Growth
        • - Hospital of the Future
        • - Value Based Care
        • - Looking Ahead to 2026
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Skilled Nursing Facilities
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing
      • Sponsored Content