Do non-profit hospitals provide more charity care when faced with a mandatory minimum standard? Evidence from Texas

Kennedy, Frances A.; Burney, Laurie L.; Troyer, Jennifer L.; Stroup, J. Caleb

doi:10.1016/j.jaccpubpol.2009.10.010

Cited by 32 publications

(26 citation statements)

References 28 publications

(33 reference statements)

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“…Furthermore, the disciplining effect that results may be preferable to explicit requirements for minimum charity care provision. Colombo (2006) discusses the merits and disadvantages of such strict standards, and Kennedy et al (2010) find empirical evidence that these standards can result in hospitals, that were previously exceeding the threshold, reducing the levels of charity care provided. These additional disclosures may be a particularly attractive solution in light of the Act which will change, once again, the landscape of the number of individuals needing charitable care.…”

Section: Discussionmentioning

confidence: 99%

“…This strict standard is not without criticism, however. While Kennedy et al (2010) find that the change in Texas law that specified a minimum level of charity care as a percentage of revenue resulted in hospitals below the threshold increasing their charity care spending, they also find that hospitals above the threshold decrease their charity care spending in response.…”

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confidence: 87%

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Tax Exemptions for Nonprofit Hospitals: Toward Transparency and Accountability

Waymire¹,

Christensen²

2011

Nonprofit Policy Forum

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Whether nonprofit hospitals fulfill their implicit obligation to provide benefits to the public that are commensurate with the benefits associated with their tax exemptions is an important policy question. To contribute to this discussion, we examine the variation in charity care provided, scaled by net patient revenues and by imputed federal income taxes, in a sample of nonprofit hospitals that are subject to Single Audit requirements. We find that small hospitals tend to provide more charity care than large hospitals, and that rural hospitals tend to provide more charity care than urban hospitals. Interestingly enough, we find little difference in charity care amounts provided by hospitals in high income areas v. low income areas, suggesting that demand for charity care, at least in this setting, has little effect on hospital behavior regarding the provision of charity care. As a result of our analyses, we make recommendations for increased availability of hospital financial statements, as well as specific disclosures of other components of community benefits, which represent the applicable standard for evaluating tax exemptions. These recommended disclosures and increased transparency would permit more meaningful policy analysis regarding nonprofit hospitals as well as a comparison to for-profit and governmental hospitals.

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Section: Discussionmentioning

confidence: 99%

mentioning

confidence: 87%

Tax Exemptions for Nonprofit Hospitals: Toward Transparency and Accountability

Waymire¹,

Christensen²

2011

Nonprofit Policy Forum

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“…Moreover, explicit quantitative standards can result in a race to the bottom when hospitals that have historically provided high levels of community benefits reduce their efforts to the level required for tax exemption. In Texas, for instance, which has explicit standards for how much community benefit is required of nonprofit hospitals to remain tax exempt at the local level, hospitals with spending levels above the threshold level have been found to lower their community benefit spending (39).…”

Section: Future Policy Directions For Community Benefit and Tax-exempmentioning

confidence: 99%

Tax-Exempt Hospitals and Community Benefit: New Directions in Policy and Practice

Rubin

Singh

Young

2015

Annu. Rev. Public Health

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The current community benefit standard for nonprofit hospital tax exemption has been the subject of mounting criticism. Many different constituencies have advanced the view that in its present form it fails to ensure that nonprofit hospitals provide adequate benefits to their communities in exchange for their tax exemption. In contrast, hospitals have often expressed the concern that the community benefit standard in its current form is vague and therefore difficult to comply with. Various suggestions have been made regarding how the existing community benefit standard could be improved or even replaced. In this article, we first discuss the historical and legal development of the community benefit standard. We then present the key controversies that have emerged in recent years and the policy responses attempted thus far. Finally, we evaluate possible future policy directions, which reform efforts could follow.

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“…15 Policy makers have proposed minimum benchmarks to address the problem of not-forprofit hospitals that do not provide sufficient benefit to the community. In Texas, not-for-profit hospitals must dedicate 4 percent of their net patient revenue to charity care, 25 and California's legislature considered a similar bill. 26 Hospitals with charity care spending levels lower than the threshold increased their spending after implementation of the Texas law.…”

Section: Policy Implicationsmentioning

confidence: 99%

“…However, hospitals that had been dedicating higher proportions of their budgets to charity care decreased their spending, and there was an overall decrease in average charity care spending levels among hospitals affected by the legislation. 25 It remains unclear whether setting minimum charity care benchmarks either increases health care access for the poor and uninsured or decreases the burden on the public health care system.…”

Section: Policy Implicationsmentioning

confidence: 99%

In California, Not-For-Profit Hospitals Spent More Operating Expenses On Charity Care Than For-Profit Hospitals Spent

Valdovinos

Hsia³

2015

Health Affairs

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In exchange for sizable tax exemptions, not-for-profit hospitals must engage in activities that meet the Internal Revenue Service's community benefit standard. The provision of charity care-free care to those unable to pay-can help meet that standard. Bad debt, the other form of uncompensated care, cannot be used to meet the standard, although Medicaid shortfalls can. However, the ACA lacks guidelines for providing charity care, and federal law sets no minimum requirements for community benefit activities. Using data from California, we examined whether the levels of charity and uncompensated care provided differed across general acute care hospitals by profit status and other characteristics during 2011-13. The mean proportion of total operating expenses spent on charity care differed significantly between not-for-profit (1.9 percent) and for-profit hospitals (1.4 percent), in contrast to the mean proportion spent on uncompensated care. Both types of spending varied widely across hospitals. Policy makers should consider measures that remove disincentives to meeting the persistent considerable need for charity care-for example, increasing supports to offset rising Medicaid shortfalls resulting from program expansion-and facilitate the tracking of ACA impacts on the distribution of charity care and uncompensated care delivery.

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Do non-profit hospitals provide more charity care when faced with a mandatory minimum standard? Evidence from Texas

Cited by 32 publications

References 28 publications

Tax Exemptions for Nonprofit Hospitals: Toward Transparency and Accountability

Tax Exemptions for Nonprofit Hospitals: Toward Transparency and Accountability

Tax-Exempt Hospitals and Community Benefit: New Directions in Policy and Practice

In California, Not-For-Profit Hospitals Spent More Operating Expenses On Charity Care Than For-Profit Hospitals Spent

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