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Charity care in government, nonprofit, and for-profit hospitals

April 6, 2021

Topics: Quote of the Day

By Ge Bai, Hossein Zare, Matthew D. Eisenberg, Daniel Polsky, and Gerard F. Anderson
Health Affairs, April 2021

Abstract

The different tax treatment of government, nonprofit, and for-profit hospitals implies different charity care obligations, with the greatest obligation for government hospitals and the least for for-profit hospitals. Prior research has not examined charity care provision among all three ownership types at the national level. Using 2018 Medicare Hospital Cost Reports, we compared charity care provision across 1,024 government, 2,709 nonprofit, and 930 for-profit hospitals. In aggregate, nonprofit hospitals spent $2.3 of every $100 in total expenses incurred on charity care, which was less than government ($4.1) or for-profit ($3.8) hospitals. No hospital ownership type outperformed the other two types with respect to charity care provision in a majority of hospital service areas containing all three types. Using different kinds of analyses, we also found wide variation in charity care provision within ownership types and a lack of a consistent pattern across ownership types. These results suggest that many government and nonprofit hospitals’ charity care provision was not aligned with their charity care obligations arising from their favorable tax treatment. Policy makers may consider initiatives to enhance hospitals’ charity care provision, particularly hospitals with government and nonprofit ownership.

https://www.healthaffairs.org…


Comment:

By Don McCanne, M.D.

There has long been a concern that nonprofit hospitals fail to provide charity care commensurate with the tax advantages afforded by the government. This study indicates that nonprofit hospitals provide even less charity care than for-profit hospitals (although others have questioned whether for-profit hospitals take liberties in adjusting off bad debt or contractual reductions in charges labeled as charity care).

Although under a single payer Medicare for All system issues would remain regarding the relative status of government, nonprofit, and for-profit hospitals, nevertheless a well designed single payer system should obviate the need for charity care since the system should be truly universal, comprehensive, and equitable.

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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