How much do hospitals spend on charity care? Analysis: Less than 2%

Modern Healthcare assesses newly available Schedule H hospital data

How much does your hospital provide in charity care? A Modern Healthcare analysis of financial data disclosed to the Internal Revenue Service (IRS) found that two in three U.S. hospitals devote less than 2% of total expenses to subsidized medical care.

In 2009, the IRS began requiring hospitals to complete the Schedule H, a separate questionnaire included in the Form 990 that details charity care, community benefits, and other operating costs. For the first-ever analysis, Modern Healthcare partnered with GuideStar—a Williamsburg, Va.-based not-for-profit organization that monitors charities—to review Schedule H data for 1,807 not-for-profit U.S. hospitals. According to the financial disclosures, the median profit margin for hospitals in 2009 was 3.13%.

Modern Healthcare found that subsidized medical care accounted for 1.52% or less of overall expenses at about half of the U.S. hospitals included in the analysis. Meanwhile, just 7% of studied hospitals devoted at least 5% of expenses to charity care. Based on the findings, Modern Healthcare determined that hospital charity care levels were mostly independent from profit levels—facilities that spent more on charity care were no more or less likely to report a profit or loss.

Findings could rekindle debate over charity care threshold
The analysis could prompt further debate over the status of charity care and hospital tax exemptions, Modern Healthcare reports. As budgets continue to tighten, federal and state officials have increased scrutiny of hospital tax exemptions based on charity care levels.

For example, the Illinois Department of Revenue this summer denied property tax exemptions to three hospitals based on their charity care levels. According to Sen. Chuck Grassley (R-Iowa), the Modern Healthcare findings show that hospitals "need to do a lot more in exchange for the generous tax breaks."

However, hospital advocates warn that the charity care numbers fail to paint a complete picture of hospitals' charitable actions. "I would caution everyone to deal with all the elements of community benefit," says American Hospital Association President and CEO Richard Umbdenstock. When defined more broadly, charity care could include resources devoted to medical research, physician training, community health programs, and losses incurred from treating Medicaid patients. According to these metrics, Umbdenstock says charity care accounts for 5.87% of the median hospital's expenses.

In addition, Julie Trocchio, the Catholic Health Association's senior director for community benefits and continuing care, notes that hospital efforts to treat patients in low-cost clinics may be bringing down charity care spending. "We do think that numbers aren't the best yardsticks to know if an organization is true to its mission," she says (Evans/Carlson [1], Modern Healthcare, 12/19 [subscription required]; Evans/Carlson [2], Modern Healthcare, 12/19 [subscription required]).

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