PRESS RELEASE: More than 1,900 nonprofit hospitals receive more in tax breaks than they give back to their community, totaling billions
Large academic medical centers and Catholic health systems among those with largest shortfall in what they give back to community.
BOSTON, MA – Federal, state, and local laws exempt nonprofit hospitals from paying a variety of taxes under the assumption they will give back to their communities in commensurate amounts through patient financial assistance, primary care clinics, substance abuse treatment, and other programs. However, a new analysis using government data finds that 80% of nonprofit hospitals give back less to their communities than they receive in estimated tax breaks, with some short by hundreds of millions. The study was conducted by the Boston-based Lown Institute, an independent healthcare think tank. Researchers used 2021 Internal Revenue Service (IRS) data for 2,425 nonprofit hospitals across the United States.
More than 1,900 hospitals pay less than their “fair share”—meaning that the value of their meaningful community contributions fall short of the value of their tax breaks. The combined fair share deficits of nonprofit hospitals totaled $25.7 billion, enough to pay off the medical debt of everyone in California, Texas, New York, and Pennsylvania combined.
“When four out of five nonprofit hospitals do not meet obligations to benefit their community, it’s a sign that regulations and incentives need to be revisited,” said Vikas Saini, MD, president of the Lown Institute. “Everyone wants to see their local hospital thrive, but not at the expense of the communities they serve.”
Ten hospitals with the largest deficit in matching their tax breaks:
| Largest deficit hospitals | Fair share deficit |
| New York-Presbyterian Hospital (New York, N.Y.) | -$274 million |
| UPMC Presbyterian (Pittsburgh, Penn.) | -$268 million |
| NYU Langone Hospitals (New York, N.Y.) | -$222 million |
| Cleveland Clinic Main Campus (Cleveland, Ohio) | -$212 million |
| Massachusetts General Hospital (Boston, Mass.) | -$194 million |
| Stanford Hospital (Stanford, Calif.) | -$181 million |
| Mayo Clinic Hospital (Rochester, Minn.) | -$165 million |
| Hospital of the University of Pennsylvania (Philadelphia, Penn.) | -$163 million |
| Vanderbilt University Medical Center (Nashville, Tenn.) | -$156 million |
| Brigham and Women’s Hospital (Boston, Mass.) | -$149 million |
IRS records show hospitals spent 3.87% of their budget on community investments, on average, but this proportion varies widely. For example, the Hospital of the University of Pennsylvania (HUP) spent 0.25% of expenses on community investments, while North Shore University Hospital (Manhasset, N.Y.) spent 8.84%. If HUP had provided community investments at the same rate as North Shore, it would have given $248 million more in community benefits in 2021. Both hospitals are academic medical centers of similar size and appear on US News & World Report’s Best Hospitals list.
Like North Shore University Hospital, which had a fair share surplus of $93 million, there are other exemplary hospitals that reported substantial fair share surpluses in 2021. Grady Memorial Hospital in Atlanta, GA has had a fair share surplus for three years in a row, including a 2021 surplus of $71 million. Mount Sinai Hospital in Chicago, IL had a $67 million surplus and Martin Luther King Jr. Community Hospital in Los Angeles, CA had a surplus of $14 million. Though these hospitals are in the minority, they prove it is possible to return a fair share to their communities.
Among the 10 systems with the greatest fair share deficits are five Catholic health systems: Providence (-$1 billion deficit), CommonSpirit (-$923 million), Trinity (-$784 million), Ascension (-$614 million), and Bon Secours Mercy (-$488 million). These five systems represent 13% of the nation’s hospitals and 15% of the fair share deficit.
A policy brief published by the Institute in conjunction with the fair share spending report identifies key actions to improve transparency and accountability. Recommendations include establishing minimum thresholds for hospital community benefit spending, requiring more detailed reporting, and intermediate enforcement actions like financial penalties for noncompliance.
“Federal regulation of community benefit spending is woefully ineffective and in need of reform,” said Dr. Saini. “Though hospitals are required to report their community contributions to the IRS, there is no minimum spend, there are many loopholes, and enforcement is practically nonexistent.”
Methodology
The Lown Institute calculated fair share spending based on nonprofit hospital IRS tax filings for Fiscal Year Ending 2021 by comparing the estimated value of hospital tax exemptions to the amount spent on meaningful community investments. The analysis includes the following IRS Schedule H categories: financial assistance, community health improvement services, cash and in-kind contributions, community building activities, and subsidized health services. Categories of Medicaid shortfall, health professions education, and research were excluded as they do not provide direct and meaningful benefit to communities. A full methodology is available.
This report includes 652 more hospitals than the one issued last year. Among the hospitals and health systems included this year but not last year are Providence, Kaiser Permanente, Mass General Brigham, Cleveland Clinic, and Mayo Clinic.
Visit the Fair Share Report page to access additional results, including state-level data and policy recommendations.
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About the Lown Institute
The Lown Institute is an independent think tank advocating bold ideas for a just and caring system for health. We envision a healthcare system focused on what’s best for people, like hospitals caring for those most in need, patients living without fear of financial distress, and health professionals finding joy in their roles. The Lown Hospitals Index, a signature project of the Institute, is the first ranking to assess the social responsibility of U.S. hospitals by applying measures never used before like racial inclusivity, avoidance of overuse, and pay equity.
Contact
Aaron Toleos, Lown Institute, (978) 821-4620, atoleos@lowninstitute.org