Tax-exempt hospitals haven’t greatly increased community benefit spending

Despite hopes the Affordable Care Act (ACA) would spur additional investments into community health initiatives by nonprofit hospitals, little changed between 2010 and 2014, with tax-exempt hospitals only increasing their average spending for all community benefits by 0.5 percentage points.

Published in the January issue of Health Affairs, the study utilized tax filings for more than 1,500 tax-exempt hospitals. It examined changes over time to what hospitals spent on patient care benefits (like charity care, unreimbursed costs for means-tested government programs and subsidized health services) and community health benefits (direct spending on community health improvement and contributions to community groups for health improvement initiatives).

Overall, Gary Young, director of Northeastern University Center for Health Policy and Healthcare Research, and his coauthors found spending for all types of community benefit “remained largely unchanged during the study period.” Tax-exempt hospitals’ average spending for all community benefits increased from 7.6 percent of operating expenses in 2010 to 8.1 percent in 2014, but researchers found the increase had occurred by 2012 and driven largely by spending on patient care benefits.

There was a nearly 20-fold difference on mean community benefits spending between the lowest and highest spending quartiles (18.28 percent versus 0.96 percent of total operating budget in 2014). However, many hospitals didn’t appear to change their habits on community benefit spending. Approximately 44 percent of hospitals in the top quartile and 48 percent of those in the bottom quartile remained in their respective places throughout the study period.

“The most obvious explanation for this finding is that more time is needed before hospitals can be expected to make a noticeable shift in community benefit spending,” Young and his coauthors wrote.

The study period may not have captured the point when hospitals were free to make bigger investments in these areas. Beginning in 2014, uncompensated care costs, including charity care, appear to have declined once states expanded Medicaid eligibility.

Other analyses, however, showed hospitals decreased their community benefit spending even after major provisions of the ACA went into effect. Massachusetts General Hospitals had dropped its benefit spending by more than $8 million between 2013 and 2015, according to POLITICO, even while its annual revenue increased by $200 million. The American Hospital Association disputed those findings, calling the story “inaccurate and irresponsible.”

In their conclusion, Young and his coauthors suggested hospitals may need more than freed-up funding to spend more on community health.

“Policy makers may need to consider other approaches for promoting hospitals’ investment in community health, such as providing technical support and training to help hospitals develop and implement community health initiatives,” they wrote.