Communities most in need get fewest community benefit dollars from hospitals, study says
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Nonprofit hospitals receive substantial tax breaks–$37 billion per year according to a recent estimate. In exchange, hospitals are expected to provide free care for those who cannot afford to pay and create programs to improve community health, such as free health screenings and immunizations, transportation services, or even affordable housing and access to nutritious food.
If you’re a regular Lown Institute blog reader, you may already know that the amount that hospitals spend on these community investments vary greatly. While some hospitals spend nearly 20% of their budget on their community, others spend less than 1%. Our research has shown that most hospitals do not spend above the estimated amount of their tax benefit, leading to a multi-billion dollar shortfall for communities.
How does this variation impact communities that hospitals serve? A new study in JAMA Health Forum from researchers at the Harvard School of Public Health finds that nonprofit hospitals gave back less to communities with less educational attainment, more poverty, and more Black and Hispanic residents, indicating structural inequities baked into this system.
About the study
Methodology: For this study, researchers analyzed tax filings for 2,465 U.S. hospitals between 2018 and 2023. They allocated community benefit spending for these hospitals to counties based on who hospitals served, using hospital discharges by zip code. They distinguished between categories of community benefit that focus on medical services (such as free or discounted care), community health and partnerships (such as donations to community groups), and activities to address the social determinants of health. Cost of health profession education and research were excluded, as these generally benefit the hospital or their employees more than the community.
While most studies on community benefit spending compare hospital spending as a share of expenses to determine how much hospitals give back, this study looked at hospital spending per capita by county to estimate how much communities receive from hospitals.
What they found: The authors found substantial variation in how much communities received; counties in the highest quintile of spending received an average of $540 per capita while counties in the lowest quintile received just $22 per capita. There were substantial income and racial disparities in the allocation of community benefit spending by county as well. Communities in the highest quintile of community benefit spending had a higher proportion of white residents, while communities in the lowest quintile had a higher proportion of low-income residents, residents who were Black or Hispanic, or residents with lower educational attainment.
These patterns were consistent across categories of community benefit spending and across years, despite the COVID-19 pandemic and nationwide Black Lives Matter protests in 2020.
A system of haves and have-nots
This new study shows another example of how inequities are baked into our health system. Our research has shown that in many urban areas, hospital markets are segregated, with some hospitals serving disproportionately more patients from low-income communities and communities of color than other hospitals. This study suggests that these patterns of segregation may affect community benefit spending as well, leaving some communities underserved.
Why does this happen? In many ways, our hospital system is one of “haves and have-nots.” Wealthier hospitals that serve more affluent communities generally have more resources to spend on community benefit programs. On the other hand, “hospitals that disproportionately service low-income and racially and ethnically minoritized communities, generally have slimmer operating margins and are more likely to have a revenue shortfall,” the authors write.
In our research, we find that many safety net hospitals give back much more to communities than they receive in tax breaks, but–as this new study shows–that spending still may not be as much as these communities require.
The community benefit spending gap is not a problem of individual hospital behavior, but a structural flaw in our health system. We incentivize hospitals to pursue patients with high-paying private insurance over patients with Medicaid coverage or those who are uninsured. We reward certain elective and specialty procedures over preventive and primary care services. And we allow hospitals to set their own policies around financial assistance and community benefit spending, which often results in underspending or allowing patients to fall into medical debt.
What’s the impact?
The nonprofit community benefit standard has the potential to substantially improve community health, both through better access to care with generous financial assistance and better health through community investment programs. In fact, hospitals are required to conduct a Community Health Needs Assessment every three years to determine the health needs their communities deem the most important to address.
However, if hospital community benefit spending isn’t going to the communities that need it most, that’s an indication that the potential of community benefit spending is being wasted. Black and Hispanic individuals face massive health inequalities, which will take significant work to eliminate. In this work, hospital community benefit spending programs could be a powerful tool if we can harness it.
Fortunately, many states have taken action to improve transparency and accountability around hospital community benefit spending. With additional financial assistance, reporting, and spending requirements, states like Oregon, Maryland, Colorado, and Minnesota are making progress toward a more equitable community benefit system.