Poverty and InequalitySexual and Reproductive HealthFamily, Maternal & Child HealthMethodology

Comparing the Value of Nonprofit Hospitals' Tax Exemption to Their Community Benefits

TitleComparing the Value of Nonprofit Hospitals' Tax Exemption to Their Community Benefits
Publication TypeJournal Article
Year of Publication2018
AuthorsHerring, B, Gaskin, D, Zare, H, Anderson, G
Date PublishedJan-Dec
ISBN Number0046-9580
Accession Number29436247
Keywords*community benefits, *health care policy, *health economics, *hospitals, *nonprofit status

The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association's (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit's total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.