A new report released by Sen. Bernie Sanders, chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, shows that many nonprofit hospital systems across the country are failing to provide low-income Americans with the affordable medical care required by their nonprofit status – despite receiving billions in tax benefits and providing exorbitant compensation packages to their senior executives.
“In 2020, nonprofit hospitals received $28 billion in tax breaks for the purpose of providing affordable health care for low-income Americans,” said Sanders. “And yet, despite these massive tax breaks, most nonprofit hospitals are actually reducing the amount of charity care they provide to low-income families even as CEO pay is soaring. That is absolutely unacceptable. At a time when 85 million Americans are uninsured or underinsured, over 500,000 people go bankrupt because of medically-related debt, and over 60,000 Americans die each year because they cannot afford to go to a doctor when they need to, nonprofit hospitals should be providing more charity care to those who desperately need it, not less. And if they refuse to do so, they should lose their tax exempt status.”
Nearly half of American hospitals enjoy nonprofit status, which exempts them from federal, state, and local taxation. In 2020, the country’s 2,978 nonprofit hospitals received an estimated $28 billion in federal, state, and local tax benefits – an average of $9.4 million per hospital. In return for nonprofit status and millions in tax breaks each year, federal law requires nonprofit hospitals to operate for the public benefit, which includes ensuring low-income individuals receive medical care for free or at significantly reduced rates – a practice known as “charity care.”
However, the HELP Committee Majority’s report shows many nonprofit hospitals have gladly accepted the tax benefits that come with nonprofit status, while failing to provide affordable care to those who need it most. The report examines 16 of the largest nonprofit hospital systems in the U.S. While each makes more than $3 billion in revenue annually, 12 of the 16 dedicate less than two percent of their total revenue to charity care, including three of the nation’s five largest nonprofit hospital chains. Of those twelve, six dedicate less than one percent of their total revenue to charity care. Meanwhile, in 2021, the most recent year for which data is available for all 16 of the hospital chains, those companies’ CEOs averaged more than $8 million in compensation and collectively made over $140 million.
In recent years, the amount of charity care provided by nonprofit hospitals has actually declined, despite the fact that patient need, revenue, and operating profits have all increased. One study found 86 percent of nonprofit hospitals spent less on charity care than they received in tax benefits between 2011 and 2018. Those additional operating profits and reserve funds were not used to help those most in need. In fact, in the same time period, average charity care spending dropped from just $6.7 million to $6.4 million.
According to the report, many of these nonprofit hospital systems also make information about their charity care programs difficult to access, leaving many patients unaware that they may qualify for free or discounted care. Some hospitals also aggressively try to collect from charity care patients through practices that verge on extraordinary collection practices banned under the Patient Protection and Affordable Care Act. One recent study found that nonprofit hospitals in 2017 sent $2.7 billion in bills to patients who were likely eligible for charity care.
Some states have already taken steps to hold nonprofit hospital systems more accountable to their communities and patients.
For example, in Texas, the state’s tax exemption for nonprofit hospitals includes a requirement that at least five percent of the hospitals’ net revenues must go to community benefits, including at least four percent dedicated to free or reduced-cost care.
Oregon state law requires hospitals to provide reduced-cost care to anyone whose income is under 400 percent of the federal poverty line and free care to anyone making under 200 percent of the poverty line. In 2023, that means individuals making less than $60,000 would not be forced to pay for the full cost of their care, while those making under $30,000 would pay nothing.
The report calls on Congress and the IRS to take action to hold nonprofit hospitals accountable to providing quality, affordable care to low-income patients across the country.
Read the full report here.