Grady Memorial Hospital ranks in the top 10 of the nation’s nonprofit hospitals for spending more on charity care than what they receive in tax breaks, according to a new report and ranking published Tuesday. Wellstar Health System also showed up high on the list — 4th in the nation for community spending by nonprofit health systems.
The rankings were based on 2021 tax filings examined by the Lown Institute, a nonprofit think tank. Lown examined close to 70 Georgia hospitals.
The result: Georgia had 22 hospitals listed among the nation’s top hospitals for community spending. Each of these hospitals had a “fair share surplus” in Lown’s latest analysis, which means their spending on financial assistance for the poor and community health needs exceeded the estimated value of their tax exemption.
Credit: Steve Schaefer
Credit: Steve Schaefer
It’s estimated that more than half of American hospitals are non-profits, a status that gives them exemption from federal, state, and local taxation. In return, the federal government requires those hospitals to operate for the public benefit and provide “charity care,” ensuring low-income individuals get medical care for free or at reduced rates.
Nonprofit hospitals’ free or discounted medical care can be potentially life-saving for some patients especially as health care costs continue to rise. This year, roughly one in four adults said they have skipped or delayed health care in the past year because of cost, according to health research organization KFF.
But nonprofit hospitals have been under fire for skimping on charity care.
Of the 2,435 nonprofit hospitals in the U.S. evaluated by the Lown Institute, 80% received more money in tax breaks than they spent on charity care and community investment, according to the report. Lown calls that a “fair share deficit.”
The Lown Institute is calling for action to fix the shortfalls in charity spending, saying a minimum threshold of community benefit spending should be set for hospitals, based on hospitals’ finances, previous spending, and local needs.
“When four out of five nonprofit hospitals do not meet obligations to benefit their community, it’s a sign that regulations and incentives need to be revisited,” said Dr. Vikas Saini, president of the Lown Institute, in a release. “Everyone wants to see their local hospital thrive, but not at the expense of the communities they serve.”
But some stood out for charitable giving. Grady ranked no. 7 in the nation for its “fair share surplus” spending of $71 million.
Among Georgia hospitals, behind Grady’s first-place ranking, Emory Healthcare had two hospitals ranking second and third for fair share surpluses in spending: Emory University Hospital Midtown with $43.7 million, and Emory University Hospital with $42.9 million.
Wellstar Health System’s good showing on the Lown list is a ranking that was controversial last year and is likely to be again this year.
Wellstar has come under intense criticism for the closure of two Atlanta Medical Center hospitals in 2022, which served predominately poor populations. However, the hospital system was ranked No. 4 for its fair share spending among health systems in the U.S. Wellstar reported a robust surplus in charity spending amounting to $85 million over seven affiliated hospitals for the year examined.
The Lown Institute calculated fair share spending for the 2,435 nonprofit hospitals by comparing spending on financial assistance and community health investments to the estimated value of its tax exemption. The source for its calculations on spending is IRS Form 990 for the fiscal year ending 2021.
Tax-exempt, nonprofit hospitals and health systems are required to file a Form 990 annually, which includes each hospital’s own estimate of the value of the charity care they have provided, along with financial information on profitability and financial reserves. The financial information from those tax forms are not subject to an auditing process, according to a recent KFF study.
Further clouding the question of how much hospitals owe their communities, hospitals have broad flexibility to establish their own eligibility criteria for charity care, and as a result, eligibility criteria vary across hospitals, according to KFF.
In Lown’s ranking, hospitals that dedicated at least 5.9% of overall expenditures to financial assistance and “meaningful community investment” were considered to have spent their fair share. The 5.9% threshold is based on established research into the valuation of the nonprofit tax exemption, according to Lown.
Lown reported Georgia had 49 hospitals that showed a deficit in their charity spending, amounting to $324 million for 2021.
Specialty hospitals, such as Children’s Healthcare of Atlanta (CHOA) were not part of the rankings.
Of the 72 Georgia hospitals Lown examined, the largest charity deficits were held by Piedmont Atlanta (-$44 million); Emory Saint Joseph’s (-$30.5 million); and Emory Decatur (-$27.3 million).
Grady declined to comment on the report. An Emory Healthcare spokesperson said they needed more time to review the report before commenting. Piedmont did not comment before deadline.
The American Hospital Association has criticized the report and said it doesn’t capture the many ways hospitals help people beyond medical care.
In a blog post Tuesday, The American Hospital Association President Rick Pollack wrote that Lown cherry-picked its data on how hospitals support their communities and misses important contributions saying, “In addition to medical care, hospitals often provide many other important social services, including food security programs, maternal and pre-natal education, vaccination clinics, nutrition and physical education classes, and subsidized transportation, to name just a few examples.”
A Wellstar spokesperson also made this point.
“As a nonprofit community health system, Wellstar conducts Community Health Needs Assessments to guide the programs we support, which extend beyond medical care to also include important issues such as food insecurity,” said Wellstar spokesperson Matthew O’Connor in a statement.
He also referenced investment this past fiscal year, not 2021, the year of tax forms evaluated by Lown. “Wellstar invested nearly one billion dollars last fiscal year alone into supporting our communities, and we greatly appreciate our team members and community partners that enable us to make such a meaningful difference,” he said.
The hospital industry has previously objected to Lown’s findings, taking issue with what the institute counts as a community benefit or charity spending.
Credit: Stephen B. Morton for The Atlanta Journal Constitution
Credit: Stephen B. Morton for The Atlanta Journal Constitution
Pollack said in the blog post that the Lown report suffered from “biases, flaws and shortcomings” and imposed an arbitrary and outdated threshold for “fair share” spending.
“America’s hospitals and health systems have proven their dedication to caring for their patients and communities time and again, particularly during the challenging circumstances in recent years,” Pollack said. “Though the Lown Institute’s so-called “Fair Share” report highlights the important contributions of certain hospitals, it misses the larger point, selectively relying on isolated data to paint a negative picture about the hospital field in general.”
Lown’s methodology explains when it tallies charity spending, it excludes costs such as Medicaid reimbursement shortfalls, the cost of training new healthcare professionals and research. Medicaid shortfall costs, the group wrote in its report, were excluded “because hospitals are already reimbursed for Medicaid patients by the state,” and covering them “does not convey a hospital policy choice.”
Nationally, Lown found that hospitals spent an average of 3.87% of their budget on community investments but noted that “this proportion varied widely” from hospital to hospital.
Hospital charity care standards have been a recent focus of some discussion among lawmakers. The Senate’s Health Education, Labor and Pensions Committee (HELP) stated in a Oct. 23 report that “In recent years, non-profit hospitals have provided less charity care even as these hospitals saw a steady increase in their revenues and operating profits.”
The report called on Congress and the IRS to better set and enforce standards for hospital charity care, stating, “The disparities between the paltry amounts these hospitals are spending on charity care and their massive revenues and excessive executive compensation demonstrates that they are failing to live up to their end of the non-profit bargain.”
The Lown Institute is based in Massachusetts and its webpage says it is a non-profit think-tank focused on unnecessary care, accountability and health equity among other concerns. It lists its financial supporters on its webpage and they include the Commonwealth Fund, the Robert Wood Johnson Foundation, Kaiser Permanente, and the John A. Hartford Foundation.
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