scholarly journals Strategic reporting by nonprofit hospitals: an examination of bad debt and charity care

2021 ◽  
Author(s):  
Amanda Beck ◽  
Collin Gilstrap ◽  
Jordan Rippy ◽  
Brian Vansant
Keyword(s):  
Cost Of Debt ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
Social Good ◽  
Hospital Managers ◽  
Community Benefits ◽  
Stakeholder Pressure ◽  
Tax Exempt ◽  
Using Data ◽  
Bad Debt

AbstractIn this paper, we examine bad debt and charity care reporting by nonprofit hospitals around bond issuance. Given the tax advantages afforded to nonprofit hospitals, including the ability to issue tax-exempt debt, hospital managers encounter stakeholder pressure to provide community benefits. When nonprofits issue debt, they also face economic pressure to meet creditors’ financial performance expectations. We document a reporting strategy that allows nonprofit hospitals to reduce the cost of bond debt while simultaneously alleviating regulators’ and community members’ concerns about inadequate provision of charity care. Using data from public bond issues for California nonprofit hospitals, we find that hospital managers shift costs from bad debt expense to charity care in periods prior to a public bond issuance and that the strategy is associated with a lower cost of debt. Our results inform those relying on accounting measurements to infer nonprofit hospitals’ social good provisions and financial health.

The Evolution of Charity Care within the Healthcare Industry

2006 ◽  
Vol 4 (1) ◽  
pp. 101-116 ◽  
Author(s):  
Pamela C. Smith ◽  
Aaron D. Crabtree
Keyword(s):  
Charity Care ◽  
Nonprofit Hospitals ◽  
Tax Exempt ◽  
Long Time ◽  
State And Local ◽  
To Come ◽  
Definition Of ◽  
State Examination ◽  
Concise Definition

Tax-exempt classification of nonprofit hospitals has been increasingly subject to federal and state examination. Considering the benefits tax-exempt entities receive, it should not be surprising that these organizations face heavy regulatory scrutiny. The problem for tax-exempt hospitals is the lack of a clear and concise definition of charity care in order to maintain exempt status. State and local regulations aside, the IRS has not presented a consistent position regarding standards for nonprofit hospitals. This paper examines the evolution of hospital tax-exempt status and its relationship to charity care. Given the IRS's evolving and conflicting definitions of charity care, we can expect this issue to be debated for a long time to come.

Strategic Reporting by Nonprofit Hospitals: An Examination of Bad Debt and Charity Care

2020 ◽  
Author(s):  
Amanda Beck ◽  
Collin Gilstrap ◽  
Jordan Rippy ◽  
Brian Vansant
Keyword(s):  
Charity Care ◽  
Nonprofit Hospitals ◽  
Bad Debt

Comparison of Trends in Nonprofit Hospitals’ Charity Care Eligibility Policies Between Medicaid Expansion States and Medicaid Nonexpansion States

2021 ◽  
pp. 107755872110396
Author(s):  
Ge Bai ◽  
Hossein Zare ◽  
Matthew D. Eisenberg ◽  
Daniel Polsky ◽  
Gerard F. Anderson
Keyword(s):  
Affordable Care Act ◽  
Medicaid Expansion ◽  
Care Provision ◽  
Policy Changes ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
Medicaid Coverage ◽  
Longitudinal Trend ◽  
Tax Exempt ◽  
The Affordable Care Act

Nonprofit hospitals provide charity care to financially disadvantaged patients according to their self-designed eligibility policies. The Affordable Care Act may have prompted nonprofit hospitals to adopt more generous eligibility policies, but no prior research has examined the longitudinal trend. The expansion of Medicaid coverage in many states has been found to reduce charity care provision, but it is unclear whether the change in charity care eligibility policies differed between Medicaid expansion and nonexpansion states. Using mandatory tax filings, we found that both hospitals in Medicaid expansion states and hospital in nonexpansion states adopted more generous eligibility policies in 2018 than in 2010, but the change was greater in the former for discounted charity care; while the former provided less charity care regardless of their policy changes, the latter provided more when their policies became more generous. This study has implications for policy discussions on the justification of nonprofit hospitals’ tax-exempt status.

Charitable Hospital Accountability: A Review and Analysis of Legal and Policy Initiatives

1998 ◽  
Vol 26 (2) ◽  
pp. 116-137 ◽  
Author(s):  
Alice A. Noble ◽  
Andrew L. Hyams ◽  
Nancy M. Kane
Keyword(s):  
Local Authorities ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
State Legislation ◽  
American Hospital ◽  
Early American ◽  
Community Benefits ◽  
Tax Exempt ◽  
Nonprofit Hospital ◽  
State And Local

Hospitals long ago shed their role as alms houses for the poor. What vestiges remain of the early American hospital are the tax-exempt, nonprofit hospital form and a general perception that hospitals, as charitable institutions, owe a duty to their communities. The appropriateness of the nonprofit hospital tax exemption has long been debated, and many theories have been advanced to justify the tax exemption of nonprofit hospitals. In a growing number of jurisdictions, however, state and local authorities have gone beyond the theoretical debate and are challenging the tax exemption of their nonprofit hospitals. For various reasons, efforts are afoot to capture greater community benefit from nonprofit hospitals.At the heart of such challenges is the debate over the nature and extent of the duty charitable institutions owe to their communities. A demand is growing for nonprofit hospitals to earn their tax exemptions by benefiting their communities in concrete ways. Some have been stripped of their tax-exempt status by local authorities or pressured to make payments in lieu of taxes. A number of states have recently implemented initiatives in an attempt to make hospitals more accountable for their community benefits. Many hospitals are responding to this heightened scrutiny in a proactive way, by voluntarily documenting community benefits. A number of nonprofit hospitals and hospital associations are cooperating with—or even sponsoring—state legislation in this area.

State-Level Community Benefit Regulation and Nonprofit Hospitals' Provision of Community Benefits

2018 ◽  
Vol 43 (2) ◽  
pp. 229-269 ◽  
Author(s):  
Simone R. Singh ◽  
Gary J. Young ◽  
Lacey Loomer ◽  
Kristin Madison
Keyword(s):  
Community Health ◽  
State Level ◽  
Health Needs ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
Minimum Income ◽  
Needs Assessments ◽  
Community Benefits ◽  
Eligibility Standards

Abstract Do nonprofit hospitals provide enough community benefits to justify their tax exemptions? States have sought to enhance nonprofit hospitals' accountability and oversight through regulation, including requirements to report community benefits, conduct community health needs assessments, provide minimum levels of community benefits, and adhere to minimum income eligibility standards for charity care. However, little research has assessed these regulations' impact on community benefits. Using 2009–11 Internal Revenue Service data on community benefit spending for more than eighteen hundred hospitals and the Hilltop Institute's data on community benefit regulation, we investigated the relationship between these four types of regulation and the level and types of hospital-provided community benefits. Our multivariate regression analyses showed that only community health needs assessments were consistently associated with greater community benefit spending. The results for reporting and minimum spending requirements were mixed, while minimum income eligibility standards for charity care were unrelated to community benefit spending. State adoption of multiple types of regulation was consistently associated with higher levels of hospital-provided community benefits, possibly because regulatory intensity conveys a strong signal to the hospital community that more spending is expected. This study can inform efforts to design regulations that will encourage hospitals to provide community benefits consistent with policy makers' goals.

scholarly journals Not-for-profit hospitals’ provision of community benefit during the 2008 recession: An analysis of hospitals in Maryland

2013 ◽  
Vol 3 (3) ◽  
pp. 7
Author(s):  
Simone Rauscher Singh
Keyword(s):  
Burden Of Illness ◽  
Panel Regression ◽  
Charity Care ◽  
Community Benefit ◽  
For Profit ◽  
Community Benefits ◽  
Not For Profit ◽  
Difficult Time ◽  
Using Data ◽  
Charitable Activities

During the 2008 recession, many U.S. hospitals had to lay off staff and cut services to reduce costs, yet little is known about how these cuts affected hospitals’ provision of community benefits. While the need for charitable programs and services grew during this economically difficult time, financial pressures may have forced hospitals to cut back on their community benefit spending. Using data for not-for-profit hospitals in the state of Maryland for the years 2006 to 2010, this study explored whether, and if so how, hospitals changed their provision of community benefit during the 2008 recession. The findings showed that, on average, Maryland hospitals increased their charitable activities during the recent recession. Between 2006 and 2010, total spending on community benefits grew from an average of 5.6% to 7.7% of operating expenses with the most substantial growth in hospitals’ provision of charity care and mission-driven health services. Panel regression analysis showed that this increase in charitable activity was associated with increases in community need. Hospitals’ financial performance, on the other hand, was unrelated to their community benefit spending. These findings indicate that even in times of constrained budgets, Maryland hospitals provided substantial amounts of community benefit in response to the needs of the communities they serve. Hospital-based community benefit programs thus have the potential to play an important role in on-going community-wide efforts aimed at reducing the burden of illness and improving population health.  

scholarly journals Tax Exemptions for Nonprofit Hospitals: Toward Transparency and Accountability

2011 ◽  
Vol 2 (1) ◽  
Author(s):  
Tammy R. Waymire ◽  
Douglas J. Christensen
Keyword(s):  
Low Income ◽  
Financial Statements ◽  
Income Taxes ◽  
Charity Care ◽  
Nonprofit Hospitals ◽  
The Public ◽  
For Profit ◽  
Community Benefits ◽  
Tax Exemptions ◽  
Urban Hospitals

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.

scholarly journals Comparing the Value of Nonprofit Hospitals’ Tax Exemption to Their Community Benefits

2018 ◽  
Vol 55 ◽  
pp. 004695801775197 ◽  
Author(s):  
Bradley Herring ◽  
Darrell Gaskin ◽  
Hossein Zare ◽  
Gerard Anderson
Keyword(s):  
Hospital Cost ◽  
Internal Revenue Service ◽  
Nonprofit Hospitals ◽  
Community Benefit ◽  
American Hospital ◽  
Internal Revenue ◽  
Community Benefits ◽  
Annual Survey ◽  
Tax Exempt ◽  
Total Community

The tax-exempt status of nonprofit hospitals has received increased attention from policymakers interested in examining the value they provide instead of paying taxes. We use 2012 data from the Internal Revenue Service (IRS) Form 990, Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports, and American Hospital Association’s (AHA) Annual Survey to compare the value of community benefits with the tax exemption. We contrast nonprofit’s total community benefits to what for-profits provide and distinguish between charity and other community benefits. We find that the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument, with many nonprofits benefiting greatly from it while providing relatively few community benefits.

The Conversion Conundrum: The State and Federal Response to Hospitals’ Changes in Charitable Status

1997 ◽  
Vol 23 (2-3) ◽  
pp. 221-250
Author(s):  
Lawrence E. Singer
Keyword(s):  
Joint Venture ◽  
Low Cost ◽  
State Level ◽  
The State ◽  
Nonprofit Hospitals ◽  
For Profit ◽  
Tax Exempt ◽  
Federal Response ◽  
Profit Status ◽  
Hospital Conversions

The pressures encountered by hospitals in the current era of reimbursement declines and stiffened competition are well known. As the “ultimate” payors—primarily employers and government—aggressively continue to seek low cost care, the response of the hospital industry has been to move toward consolidation and efficiency-enhancing mechanisms.Increasingly, nonprofit, tax-exempt hospitals have come to believe that they are at a significant disadvantage vis-á-vis their for-profit brethren in their ability to attract the capital needed to compete in the market. A growing trend among nonprofit hospitals, therefore, is to sell to or enter into a joint venture with a proprietary organization, or alternatively to convert to for-profit status. In 1995, fifty-eight nonprofit hospitals became for-profit; hospital conversions to for-profit status in 1996 are projected to outstrip the pace established the prior year.The conversion trend has not gone unnoticed at the state level. Recently, several states have proposed or enacted laws regulating sales and conversions of nonprofit hospitals, and many more states are contemplating such legislation.

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