Charitable expectations of nonprofit hospitals: Lessons from Maryland

Health Affairs

Volumn 28, Issue 5, 2009, Pages

  Gray, Bradford H ^b   Schlesinger, Mark ^a  

^a YALE UNIVERSITY   (United States)

^b NONE

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; HEALTH CARE POLICY; HOSPITAL CARE; HOSPITAL SERVICE; LAW; NON PROFIT HOSPITAL; RESOURCE ALLOCATION; SOCIAL WELFARE; UNITED STATES;

DISCLOSURE; GOVERNMENT REGULATION; HOSPITALS, PUBLIC; MARYLAND; UNCOMPENSATED CARE;

EID: 70349227019     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.28.5.w809     Document Type: Article

References (20)

1. Senate Committee on Finance - Minority, "Tax-Exempt Hospitals: Discussion Draft," http://finance.senate.gov/press/Gpress/2007/prg071907a. pdf (accessed 7 July 2009).
2. Broad definitions include bad debt and payment shortfalls from governmental programs.
3. U.S. Government Accountability Office, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, 1990);
4. M. Morrisey, G.J. Wedig, and M. Hassan. "Do Nonprofit Hospitals Pay Their Way?" Health Affairs 15, no. 4 (1996): 132-144;
5. N.M. Kane and W.H. Wubbenhorst, "Alternative Funding Policies for the Uninsured: Exploring the Value of Hospital Tax Exemption," Milbank Quarterly 78, no. 2 (2000): 185-212;
6. and S. Nicholson et al., "Measuring Community Benefits Provided by For-Profit and Nonprofit Hospitals," Health Affairs 19, no. 6 (2000): 168-177.
7. Catholic Health Association, Community Benefit Reporting: Guidelines and Standard Definitions for the Community Benefit Inventory for Social Accountability (St Louis: Catholic Health Association of the United States, VHA Inc., and Lyon Software, 2004).
8. "Mission-driven health services" are similar to the CHA/VHA and IRS category called Subsidized Health Services.
9. Because hospitals' charges may be two or three times costs, community benefit calculations based on charges are generally viewed as misleading. However, because Maryland's hospital rates (charges) are based on audited costs, the difference between costs and charges there is negligible.
10. For an explanation, see Maryland Hospital Association, "Maryland Hospital Rate Regulation," August 2006, http://www.mdhospitals.org/mha/ News-Publications/HSCRC.Md.Rate.Setting.Facts.pdf (accessed 7 July 2009).
11. U.S. Census Bureau, Table HI05. Health Insurance Coverage Status and Type of Coverage by State and Age for All People: 2006, in Current Population Survey, 2007 Annual Social and Economic Supplement (Washington: U.S. Government Printing Office, 2007).
12. An article based primarily on those interviews is to appear in the Summer 2009 issue of Inquiry.
13. Medical education spending is greatly offset by Medicare's graduate medical education expenditure payments to hospitals. Even so, this is treated as community benefit spending in Maryland (and in the new IRS requirements), presumably because education is explicitly mentioned in Section 501(c)(3) as a charitable purpose.
14. P.J. Cunningham and J.H. May, "A Growing Hole in the Safety Net: Physician Charity Care Declines Again," Tracking Report no.13 (Washington: Center for Studying Health System Change, March 2006).
15. The decline in financial contributions in 2007 was largely due to a regulatory change that gave hospitals discretion not to include indirect costs; many then decided not to addin direct costs to their charitable donations.
16. Some hospitals allocate such administrative costs to other community benefit categories.
17. Calculated from hospitals' community benefit reports, available on the Web site of the Health Services Cost Review Commission, http://www.hscrc.state. md.us.
18. A. Dobson, J. DaVanzo, and N. Sen, "The Cost-Shift Payment 'Hydraulic': Foundation, History, and Implications," Health Affairs 25, no.1 (2006): 22-33.
19. Bad-debt expense is also built into the rates set for hospitals in Maryland but is not counted as a community benefit expenditure, even though research (elsewhere) has shown that a substantial portion of hospital bad debt is incurred by patients who might be eligible for charity care. See J.S. Weissman, P. Dryfoos, and K. London, "Income Levels of Bad-Debt and Free-Care Patients in Massachusetts Hospitals," Health Affairs 18, no.4 (1999): 156-166.
20. M.V. Pauly, "Health Systems Ownership: Can Regulation Preserve Community Benefits?" Frontiers in Health Services Management 12, no.3 (1996): 3-34.