Tax-exempt hospitals exceedingly beneficial to their communities

June 8, 2022

A report by the American Hospital Association (AHA) states that two new analyses show that tax-exempt hospitals are exceeding their obligation to deliver benefits to their community.

The first analysis by the international accounting firm of Ernst & Young (EY) reported that tax-exempt hospitals and health systems delivered an impressive $9 in benefits back to their communities for every dollar’s worth of federal tax exemption. In 2019, the estimated tax revenue forgone due to the tax-exempt status of non-profit hospitals is $12.4 billion. In comparison, the benefit tax-exempt hospitals provided to their communities, as reported on the Form 990 Schedule H, is estimated to be $110.9 billion, almost nine times greater than the value of tax revenue forgone.

The second analysis prepared and released by the American Hospital Association (AHA) using data from filings with the Internal Revenue Service (IRS) again showed that tax-exempt hospitals provided more than $110 billion in total benefits to their communities in filings for fiscal year 2019 (up from $105 billion in 2018). 2019 is the most recent year for which comprehensive data is available. The analysis shows that total community benefits were 13.9% of their hospitals’ total expenses, nearly half of which was attributed to expenditures for financial assistance for patients and absorbing losses from Medicaid and other means-tested government program underpayments.

“For the past two and a half years, our nation has seen firsthand how America’s hospitals and health systems have cared for their patients and provided essential services to their communities in times of an unprecedented public health crisis. In addition to providing critical care, hospitals and health systems of all sizes, types and locations deliver a wide range of tailored benefits, activities, services, programs and research to meet the varied health needs of those they serve,” said AHA President and CEO Rick Pollack.

In return for being exempt from federal taxes, non-profit hospitals are required to serve their communities and seek input from members of their communities, particularly communities dealing with sustained hardships. Hospitals report publicly on community benefit activities, which include financial assistance for those in need, and a wide range of programs and services designed to meet the current and future health needs of all they serve. In addition, hospitals and health systems support emergency preparedness for all types of disasters; education and training for the next generation of caregivers; clinics for underserved communities; and a range of tailored programs to keep their communities healthy and productive.

AHA release

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