Last updated: November 20, 2023
Nonprofit hospitals are required to provide Community Benefits such as free care for low-income patients and investments in community health to maintain their tax-exempt status. However, the Lown Institute’s report on Fair Share Spending shows that relatively few hospitals give back to communities as much as they get in tax breaks.
In the table below, see what policymakers across the country doing to improve transparency and accountability around hospital community benefit spending. We’ll be updating this page as new policies develop.
| State | Recent activity on hospital community benefit and tax exemptions |
|---|---|
| California | As of 2019, hospitals are required to make their community benefit plans publicly available on their website, including how community health needs are being addressed and how much they spend on total community benefits. A bill in 2021 expanded the definition of “vulnerable populations” for community benefit reporting and planning purposes. UPDATE: California is considering a bill (AB 666) that would clarify the definition of community benefit and standardize reporting requirements for hospitals. Under this law, Medicare shortfall would no longer count as a community benefit (aligning with IRS) and Medicaid shortfall must be based on what Medicare would pay for the service (this would reduce hospitals exaggerating their Medicaid shortfall). The community benefit plan must include the “proportion and amount of community benefit spending on vulnerable populations, and include measurable objectives that outline equity benchmarks.” The bill also increases the maximum fine from $5,000 to $50,000 for noncompliance. (Learn more) |
| Colorado | UPDATE: In May 2023, Colorado passed a new community benefit law that requires hospitals to hold an annual public meeting to present their community benefit plans and receive feedback from the community. Hospitals will also be required to report spending on specific categories such as behavioral health, financial assistance, and investments in the social determinants of health. Hospitals must include information on how these investments impact health outcomes in their community and how this spending directly corresponds to a community-identified health need. Hospitals that do not comply can be fined by the state board of health. |
| Georgia | In March 2023, Atlanta policymakers and the state NAACP asked the IRS to investigate Wellstar Hospital System, for closing their Atlanta hospital branch even though access to care was identified as a community health need in the area |
| Illinois | Illinois updated their reporting rules in 2021 to require hospitals to describe “activities the hospital is undertaking to address health equity, reduce health disparities, and improve community health” as well as details about financial assistance applications received and processed by hospitals. The Attorney General has authority to compile complaints and enforce violations. |
| Maryland | Maryland law requires all acute care hospitals to provide a patient information sheet upon discharge that includes a description of the hospital’s financial assistance policy, as well as the patient’s rights and obligations with regard to hospital billing and collection under the law. All hospitals are required to accept a “common financial assistance form” that has been developed by the state. UPDATE: As of new legislation in effect July 2023, hospitals who charged patients for hospitals services from 2017-2021 when they could have qualified for free care must issue a refund to patients. The state health commission can impose a fine of up to $50,000 per violation if a hospital fails to provide refunds to qualifying patients. |
| Massachusetts | In 2018, the Massachusetts Attorney General revised the state’s community benefit reporting guidelines after convening an expert working group. Hospitals are now asked (voluntarily) to report specifically spending on programs to address health issues from the CHNA and report spending by facility, making it easier for community groups to understand how much hospitals are spending on meaningful community benefits. Boston has a voluntary system of PILOT payments (payment in lieu of taxes) that asks large nonprofits such as hospitals and universities to pay a stipend to the city, to help pay for things like water, fire fighters, sewage, etc that they make use of. UPDATE: State legislators have proposed extending these PILOT payments statewide; this bill is still in committee as of May 2023. |
| Minnesota | NEW: A 2023 state law requires hospitals to screen any all uninsured patients for financial assistance eligibility within 30 days of receiving care, and all insured patients before taking action to collect medical debt. Before taking legal action to collect debt, cases must undergo a legal review. (Minnesota Post-Bulletin) |
| Montana | In response to a 2020 state audit of hospital community benefit performance, Montana legislators proposed a bill in 2022 that would set higher reporting standards for hospital community benefit spending. UPDATE: Due to opposition from hospitals, this bill was watered down and now does not require hospitals to report anything additional to what they provide the IRS. |
| New Jersey | In response to a tax court ruling that found that some hospitals were not meeting criteria for their tax exemption, NJ passed a law in February 2021 that hospitals have to pay a $3 per-bed-per-day fee to local governments to make up for property taxes they don’t pay. Hospitals contributing more than 12 percent of their operating budget to community benefit spending are exempt from the contribution. |
| New York | New York City is considering a bill to create an Office of Healthcare Accountability, which would be authorized to collect community benefit and property tax information from NYC hospitals. UPDATE 6/8/23: The bill to create an Office of Healthcare Accountability is expected to pass, allowing the city to analyze hospital costs, prices, and community benefit spending. |
| Oregon | NEW: A state law passed in July 2023 contains several regulations making it easier for patients to access financial assistance. The law requires hospitals to presumptively screen all patients for financial assistance if they are uninsured, enrolled in Medicaid, or owe the hospital $500 or more. The hospital cannot bill these patients before screening them for assistance and applying relevant discounts to the bill. The law also makes financial assistance easier to apply for by making applications available online with a single click; requires hospitals to stop collection activities if a patient appeals a financial assistance denial; and requires hospitals to report data on how many applications they have received, denied, and sent to collections. In 2019, Oregon passed HB 3076 creating a community benefit spending floor for each nonprofit hospital. The spending minimum is set every 2 years by the state, based on community need, historic expenditures, hospital finances, and other considerations. |
| Pennsylvania | In March 2023, a county appellate court revoked Tower Health’s property tax exemption for their excessive CEO pay and management fees. Separately, Pittsburgh Mayor Ed Gainey announced that the city is examining the tax-exempt status of several parcels, including some belonging to UPMC |
| Texas | Texas’ recent state budget allocates funding to the Health and Human Services Commission will “evaluate hospital revenue and expenses, as well as public debt and the value of tax-exemptions, and the value of any charity care provided, as applicable by hospital and system” and will publish findings in December 2024 on hospital tax exemptions, finances, and financial assistance provision. |
| Washington | State laws passed in 2022 RCW 70.170 and WAC 246-453 require hospitals to develop financial assistance policies and procedures to ensure that all patients with family incomes below 200% of the federal poverty guidelines are able to obtain medically necessary hospital care free of charge, and patients with family incomes up to 400% of the federal poverty guidelines are able to obtain that care at a discount. (Washington State Department of Health) |
NOTE: This table focuses on recently proposed or enacted policies. For a more on long-standing state policies on community benefit, see the Hilltop Institute‘s state profiles on community benefit law and the National Consumer Law Center’s report on state financial assistance eligibility policies.
More on hospital community benefits
Nonprofit hospitals must comply with several criteria set by the IRS to maintain their tax-exempt status. One of these is the hospital community benefit standard. Under this standard, hospitals must report their spending on certain community benefit categories on Schedule H on their tax form.
However, there is no federal requirement to spend a certain amount on community benefits to stay a nonprofit hospitals. In fact, several recent analyses of hospital spending on financial assistance using hospital cost reports show that overall, nonprofits don’t spend significantly more on financial assistance than for-profits do. The Lown Institute’s Fair Share Spending report found that 77% of nonprofit hospitals received more in tax breaks than they spent on meaningful community investments.
Community benefit categories
Not all of the categories of community benefit that the IRS includes are equally meaningful for community health. Some of these categories, such as community health improvement services, community building activities, and contributions to community groups, incorporate the types of programs one would expect to see hospitals undertaking to improve community health and social conditions. Of all the community benefit spending reported, less than 8% goes to these categories.
For our Fair Share metric, we focus on the categories that have a direct and meaningful impact on communities (see table below).
| IRS SCHEDULE H Community Benefit Categories | Included in Lown Institute Fair Share Spending metric? |
|---|---|
| Financial Assistance – Free or discounted care given to low-income patients eligible under the hospital’s policy. | Yes |
| Community health improvement activities – Programs to improve community health, such as health education, immunizations, blood pressure screening, etc. Also includes the cost of community benefit operations. | Yes |
| Subsidized healthcare services – Clinical services that serve an identified community need, and would not otherwise exist if the hospital did not offer them, provided despite a financial loss to the organization. Includes services like burn unit, behavioral health and substance abuse treatment, labor and delivery, etc. | Yes |
| Contributions to community groups – Cash or in-kind contributions to community groups | Yes |
| Medicaid shortfall – Unreimbursed cost of treating Medicaid patients (the difference between what Medicaid pays for the care hospitals provide and what hospitals report as their cost of care) | No. We do not include Medicaid shortfall because it is not direct and meaningful spending on community health. Hospitals offer discounted rates for most insured patients, yet these are not considered community benefits. Hospitals already make up for this shortfall by charging private insurers more or by receiving Disproportionate Share Hospital payments. While charity care spending reflects the amount patients would pay absent of hospital policy, Medicaid shortfall does not convey a hospital policy choice. (Learn more) |
| Shortfall from other government programs – Unreimbursed cost of treating patients with other means-tested government programs (SCHIP, eg) | No. As with Medicaid shortfall, hospitals’ unreimbursed cost of other means-tested government programs is already made up through higher prices for privately-insured patients, and does not represent a direct and meaningful investment in community health. |
| Health professions education – Unreimbursed cost of training residents and other health professionals | No. While it’s important for society to have well-trained clinicians, this isn’t an activity that directly addresses the specific health needs of hospitals’ surrounding communities. Relatively few hospital trainees go on to work in medically underserved areas or understaffed specialties after training. Additionally, hospitals do not report the indirect payments they receive for training health professionals. (Learn more) |
| Research – Cost of research conducted by the organization | No. We do not consider the cost of research a direct and meaningful investment in community health because hospitals’ research priorities are not based on specific community health needs. Additionally, hospitals may report research that is already fully funded, which does not represent an unreimbursed cost. (Learn more) |
| Community building activities* – Programs to improve the social drivers of health such as affordable housing, environmental quality, and food security *Community building activities are reported on Part 2 of Schedule H, not with Part 1 like other types of community benefit spending | Yes – Even though the IRS does not include community building activities on the same page as other types of community benefit, health policy experts and hospitals are recognizing the importance of investing in the social drivers of health. We consider this spending crucial to improving community health in the long term. |
For more information on hospital community benefit spending, see our explainer blog.