Tax Exempt Hospitals

cross posted from ataxingmatter Linda Beale

Tax Exempt Hospitals–the American Hospital Association response to the IRS study

Last week, I reported on the government study of tax exempt hospitals, which looked at community benefit and executive compensation, and asked whether hospitals merit tax exempt status, at this link. The conclusions on community benefit were not very impressive–a few hospitals do a bulk of the benefiting, but all of the hospitals take advantage of the tax exemption. And all of the executives are quite highly paid, a trend in tax exempts that is not a very nice one to see.

Not surprisingly, the American Hospital Association has responded to the IRS report with a press release that, as John Colombo over on Nonprofit Law Prof Blog notes, “defends nonprofit hospitals from any unsavory light cast by the report” while “not highlight[ing] the ridiculus practice of hospitals reporting the amount of uncompensated care and other community benefits by the difference between standard charges and costs” and a few other not so savory items.

The lead statement in the press release is the following:

Today’s IRS report reaffirms that hospitals of all types are providing a healthy mix of care and services to the communities they serve. While the report has its limitations, it highlights how hospitals across the country are meeting their mission of caring for communities.

My reaction upon reading that lead-in statement was, basically, “yeah, sure”. As Colombo noted, the report highlights how little hospitals really do in terms of community benefit, and notes (to an extent that I did not discuss in my earlier report) the ways in which many hospitals try to overreport community benefit by counting their foregoine expected profits (which could be outrageously inflated) rather than any real loss from providing services. They get their costs, they just don’t always make a profit off a transaction. More than that, the report makes one ask whether most tax-exempt hospitals have any right at all to claim an exemption–it begs for proof, that is, that hospitals are, indeed, “meeting their mission” rather than just making profits. Even if the executive compensation currently paid satisfies the IRS rather exec-friendly rules, it is actually outrageously high for nonprofits.

Somewhere, someday, this ability of corporations,–whether taxpayers or exempt–to rip off taxpayers and underpay their typical workers–the orderlies and nurses, the clerks in the back offices and the receptionists up front– in order to pay outlandishly large salaries to the people at the top of the iceberg who benefit from the corporatist approach or in order not to provide the kind of free care to the underinsured that is expected of “charity” hospitals, has to stop.

February 24, 2009