Nonprofit Hospitals Are “Confused” About Charity and Profits

ACORN ACORN International

New Orleans       Over the last several years, ACORN International and the Labor Neighbor Research & Training Center have been collecting and analyzing the IRS 990 forms filed by tax exempt, nonprofit hospitals in Arkansas, Louisiana, and Texas.  This is a project driven by our “volunteer army,” so it has risen and fallen as our soldiers have entered or deserted the battlefield.  We have been immeasurably assisted though by student interns from Tulane University in New Orleans and the University of Ottawa in Ontario, Canada.  We collected most of the 990s three years to four years ago and are now collecting the most recent filings in order to compare the numbers and finish the report.

What are we looking for, you might correctly wonder?  We’re looking at the level of charity care, which is the essence of extremely valuable federal tax exemption enjoyed by these institutions.  Believe it or not, it’s not easy to find, and once found, is often abysmally small compared to what you would expect for institutions receiving the benefit.

A recent piece by Dr. Danielle Ofri in the New York Times noted that,

“An analysis by Politico found that since the full Affordable Care Act coverage expansion … revenue in the top seven nonprofit hospitals (as ranked by the U. S. News & World Report) increased by 15 percent, while charity care – the most tangible aspect of community benefit – decreased by 35 percent.”

This is a confounding observation which tracks the work we have been doing as well.  On one hand the “community benefit” is the test the IRS uses to determine whether a healthcare institution continues to be deserving of the tax benefit.  On the other hand, it flies in the face of the requirement in the Affordable Care Act that the IRS monitor and check charity care to assure that it increases under the ACA at penalty of pulling the tax exemption for non-compliant institutions.

Dr. Ofri  joins us in noting that some of these hospitals are also trying to claim a community benefit essentially by cooking the books.  In some cases, they are trying to write off the difference between their inflated sticker price for procedures with the more realistic, and lower, rate that Medicaid allows for a reimbursement by calling a “loss.”   Believe it or not!

When we began our work the average level of charity care around the country was roughly 4%.  Seems low, doesn’t it?  Nonetheless, we took that number as a comparative benchmark.  The giant Hermann Memorial in Houston was hardly half of that number.  The rapidly expanding billion dollar, Ochsner Hospital network based in New Orleans was hardly 1%.

We’re worried that the numbers are going down rather than up for charity care.  Iowa’s Republican Senator Church Grassley had insisted on this amendment to the Affordable Care Act.  Next year he will have served forty years in the Senate.  If charity care is going down, rather than up, we have to wonder if he’s still really on the job.