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Tax-exempt hospitals provided nearly $150 billion in total benefits to their communities in 2022, the most recent year for which IRS data is available, according to a new analysis from the American Hospital Association.
The total marks a nearly 50% increase in community benefit spending from 2017 to 2022, with hospitals and health systems boosting their overall community benefit by about $49 billion.
Roughly $65 billion in benefits – representing nearly 7% of nonprofit hospitals’ total expenses – was for financial assistance for patients in need, including absorbing underpayments from Medicaid, the Children's Health Insurance Program and other federal, state or local government programs for low-income individuals.
Tax-exempt hospitals’ and health systems’ total community benefits were 15.1% of their total expenses in 2022, the report found.
WHAT’S THE IMPACT
Community benefits include financial assistance, Medicaid, community health improvement services, Medicare shortfall, certain bad debt expenses and health professions education.
In 2022, financial assistance and unreimbursed costs from Medicaid and means-tested government programs were 6.6% of total tax-exempt hospital expenses. When combined with expenditures for health professions education, medical research, cash and in-kind contributions, and other benefits, this value amounts to 11% of expenses in 2022, the data showed.
Although it’s difficult to calculate the exact amount due to what the AHA called minimal guidance from the FDA, about 39% of hospitals reported bad debt, which represented 0.2% of expenditures in 2022. Hospitals often classify unreimbursed care from patients who don’t complete the financial assistance process as bad debt.
Almost 74% of participating hospitals and health systems reported having Medicare shortfalls, which occur when the federal government reimburses the hospitals less than their costs for treating Medicare patients. Most hospitals described why they think their Medicare shortfall should be considered a community benefit, with many saying that non-negotiable Medicare rates are sometimes out of line with the true costs of treating patients.
Additionally, by continuing to treat Medicare-eligible patients, hospitals said they alleviate the federal government’s burden for directly providing medical services.
THE LARGER TREND
Also in 2022, health systems and hospitals spent an average of 0.05% of their total expenses on community-building activities, which can range from environmental improvements and workforce and job development to participating in a state Board of Health.
These activities often promote community regional health by offering direct and indirect support to communities with unmet health needs, the AHA said. These include patients who are indigent, uninsured, underprovided for or geographically isolated from healthcare facilities.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.