Others claim that subsidized care is a critical measurement of a hospital's community impact.
As Illinois hospitals' charity care dropped after more people gained healthcare coverage, so did their net community benefit spending. This suggests that hospitals aren't reallocating investment to other community programs.
“We're not seeing that reinvestment from dwindling charity care,” said Young, whose analysis of 1,501 not-for-profit hospitals showed that community benefit spending only slightly increased from 7.6% of their operating expenses in 2010 to 8.1% in 2014.
A significant portion, about a fifth, of community benefit spending went toward “health professions education” costs, much of which funded workforce training and development. Outreach programs, including community health improvement services and direct cash contributions for community benefit, represented a small share of overall community benefit spending, hovering around 3% each for Modern Healthcare's Illinois data set. Subsidized health services and research represented around 10% and 5% of total community benefit spending, respectively.
Hospitals in low-income areas have to spend more on free and subsidized care, which means they spend less on preventive community programs. Conversely, hospitals in affluent areas have the flexibility to spend more on community programs, arguably where they're needed less. This dynamic perpetuates the status quo.
“It's a vicious cycle,” Young said.
The narrative section of the IRS Form 990 can feature a range of expenses related to such things as expanding nutrition programs, providing health screenings, hosting behavioral health support groups, opening outpatient clinics for specialty care and hiring new chronic disease doctors, according to a Modern Healthcare analysis.
It also includes promoting participation in hospitals' online portals, offering online educational materials related to the insurance marketplace, promoting preventive-care resources on its website, provider-to-provider telephone consults, and sponsorships focused on wellness and healthy eating.
“There's a lot of flexibility,” said JP Leider, a senior lecturer in the University of Minnesota's division of health policy and management who studies community benefit spending. “There's not a lot of downside for getting it wrong.”
Little differentiates community benefit programs that are self-serving from those that truly benefit communities, said Paul Keckley, an industry consultant and managing editor of the Keckley Report.
“It gets hazy when a hospital is screening someone for a joint replacement or Type 2 diabetes—is that marketing or community benefit?” Keckley said.
The difference is not lost on cash-starved communities that are eyeballing unrecouped property and sales taxes resulting from having a potentially cash-rich, not-for-profit hospital in their community.
Hence the phrase “no margin, no mission,” which the not-for-profit sector often touts as they focus on financial health. But public officials, including Sen. Chuck Grassley (R-Iowa), have become even more wary as they see not-for-profit health systems expand their stronghold on regional markets and executive salaries balloon.
Grassley said in November that he plans to rejoin the Senate Finance Committee, which means that he can reinvigorate oversight of tax-exempt healthcare providers, said Michael Peregrine, a partner at law firm McDermott Will & Emery.
“These companies are now basically for-profit entities in sheep's clothing,” said David Miller of Service Employees International Union-United Healthcare Workers West.
In September, the Illinois Supreme Court upheld the tax breaks that benefit each of the state's 157 not-for-profit hospitals. The annual property tax exemptions amount to tens of millions dollars apiece for some of Chicago's largest hospitals. The decision capped a near decadelong legal battle debating whether the tax-exempt properties were used solely for charitable purposes.
The 2012 law in question says that hospitals must quantify the value of their tax exemption and provide at least as much value in treating the poor, thus relieving government's burden. Hospitals use a three-year average of charity care to determine a dollar value, and then can fund other charitable healthcare organizations to make up any gap.
“A lot of times provisions in the law are not as clear, which invites litigation,” said Doug Swill, a partner at Drinker Biddle. “There is going to continue to be ongoing tension.”
Public officials in Ohio, New Jersey and Pennsylvania also have challenged hospitals' tax exemptions. In 2015, Morristown (N.J.) Medical Center agreed to pay $26 million to city coffers to end a protracted dispute over its property tax exemption.
With the increasing focus on social determinants of health, hospitals and systems are realizing that public health issues need to be tackled together.
The Illinois Public Health Institute spearheaded the Health Impact Collaborative of Cook County, which includes 26 hospitals, seven health departments and nearly 100 community organizations. The collaborative was formed in 2015 to facilitate data and resource sharing to improve community health needs assessments.
Its 243-page report outlines the following priorities: improving social, economic and structural determinants of health, improving mental health and decreasing substance abuse, preventing and reducing chronic disease, and increasing access to care and community resources.
Advocate Health Care, which joined the collaborative before it merged with Milwaukee-based Aurora Health Care, revamped its community health arm four years ago, said Bonnie Condon, vice president of community health and faith outreach for Advocate Aurora Health. It hired staff with public health expertise who helped it design new evidence-based programs through a public health lens, she said.
But many hospitals do not capture all their community benefit impact. One of the most underreported areas is subsidized services, experts said. “Those are services that the hospital keeps going even though it keeps losing money because they're needed by the community,” said Julie Trocchio, senior director of community benefit and continuing care at the Catholic Health Association.
HHS Secretary Alex Azar said in November that Medicaid may soon allow hospitals and health systems to directly pay for housing, healthy food or other needs affecting health.