A new review of tax forms released by the American Hospital Association (AHA) suggests nonprofit hospitals and health systems increased their collective total community benefit by $49 billion—nearly 50%—from 2017 to 2022.
The review, released Wednesday and conducted with Ernst & Young on behalf of the lobbying group, tallied $149 billion spent on areas like health professional education, medical research and cash or other in-kind contributions benefiting the community. The total is also inclusive of the costs nonprofit hospitals absorb when providing care to uncovered patients as well as the difference in care costs and reimbursement for Medicare or Medicaid patients and other types of financial assistance.
The $149 billion of total community benefits represented 15.1% of these hospitals’ expense spending in 2022, with the financial assistance and other absorbed care costs comprising 6.6% of total expenses, according to the report.
“This report reaffirms that improving the health of their communities is at the heart of every hospital and health system’s mission,” said AHA President and CEO Rick Pollack. “In the face of a number of obstacles that pressure our healthcare system and caregivers, the hospital field has doubled down on our commitment to expanding care outside the four walls of the hospital and advancing health in the communities we proudly serve.”
The AHA’s report (PDF) combined data from 2,813 hospitals’ Schedule H tax forms for 2022, the most recent year available, with total expense and hospital characteristic data from the group’s annual surveys. It also reviewed community benefit spending for a subset of 1,809 hospitals for which demographic data were available, showing larger proportional spending among larger hospitals, urban/suburban hospitals and children’s hospitals.
To receive their tax-exempt status, nonprofit hospitals are required by law to conduct assessments of community health needs, address those needs, implement a written financial assistance policy and report those activities to the IRS.
The trade group often points to its annual tally of total community benefit to counter criticism of hospitals’ tax exemptions. Though not estimated in this week’s report, another released last year described a collective federal tax exemption of $13.2 billion in 2020 that paled in comparison to that year’s $129 billion IRS-reported benefit.
However, the trade group’s methodology when characterizing hospitals’ benefits has been contested as overly generous, and its tax exemptions as understated, by outside groups conducting similar reviews.
One such critic, the Lown Institute, conducted an analysis of 2021 records that found 4 in 5 nonprofit hospitals were spending less on “meaningful community investment” than their estimated tax breaks. Lown’s approach does not include areas like Medicaid shortfalls or research, with the group noting that hospitals are compensated for these areas through state-directed payments and grant funding. The group is currently preparing its 2025 analysis with updated records.
An academic study published last year in JAMA using Medicare cost reports pegged nonprofit hospitals’ federal, state and local tax benefits at more than $37 billion—squarely above the industry’s estimate that the researchers said did not appear to capture nonfederal exemptions. That analysis also underscored substantial variation in tax benefits between different localities, suggesting that any policy actions targeting these tax breaks may be better deployed at the state or local levels.