Non-profit hospitals across the country get millions of dollars a year in tax breaks for their work in the community. The question is: how many of these non-profit hospitals are doing enough to deserve this tax break and who is holding them accountable? Does your local hospital provide your community with benefits equal to the value of the taxes it avoids paying because of non-profit status? And does your hospital really serve all of the diverse people who live in your community? 

On December 8, Community Catalyst’s Community Benefit and Economic Stability Project and Hospital Equity and Accountability Project teams were joined by two members of the Lown Institute, Judith Garber and Dr. Vikas Saini, to tackle these questions. In a webinar facilitated by Community Catalyst Executive Director Emily Stewart and HEAP Senior Advisor Lois Uttley, the Lown Institute shared their Hospital Index platform and demonstrated how advocates can use it to hold hospitals accountable to its communities.

The Lown Institute first released its Hospital Index in July 2020. Lown staffers measure the nation’s hospitals’ social responsibility to their communities through well-researched measures of equity, value and accountability. These three larger categories are subsequently broken down into more specific measures, equating to 55 total different categories. They illuminate categories such as pay equity, avoiding over use of medical care, and whether a hospital is racially inclusive in the patients it serves, trying to reframe what it means to be a high performing hospital.

Dr. Saini talked about the development of the Index, noting that, “We knew many changes in US health care have taken place over the last decades. So we wanted to look at [Can we reframe what it means to be a high performing hospital?]” (see clip).

Graphic text from the Lown Institute that says: We give hospitals billions in tax breaks. What do we get back?
Graphic image from the Lown Institute’s Facebook page that says: “We give hospitals billions in tax breaks. What do we get back?”

Measuring Hospitals’ Racial and Economic Inclusivity

Through its inclusivity measure, the Lown Institute is able to measure the disparities in access to a particular hospital for patients of color and patients with low socio-economic status. First, researchers examine a hospital’s stated catchment area — the zip codes from which its patients theoretically would be drawn — and the racial and economic makeup of the people living in those zip codes. Then, the researchers compare those demographics with those of the patients actually served by the hospitals, drawn from Medicare data.

Sometimes the differences are quite striking, with a hospital’s actual patients coming from zip codes that are far whiter and more affluent, indicating that the surrounding lower-income neighborhoods of color are not being adequately served by the hospital.

One finding from the most recent measurements of hospital inclusivity was that 15 US cities have racially segregated hospital markets with 50 percent or more of hospitals over-serving or underserving communities of color. Dr. Saini emphasized he does not want Lown Institute to define what is acceptable in the way of hospital inclusivity, but believes their index provides critical tools for advocates and policymakers to examine in considering policy changes (see clip here).

Meaningful Community Benefit Spending in Local Communities

Non-profit hospitals are federally obligated to provide community benefit in exchange for tax exemption from federal, state and local taxes. However, while hospitals are required to report community benefit spending annually, hospitals are not required to invest a minimum amount into their community benefit spending, nor does the spending require investment in health issues identified in their Community Health Needs Assessments. While the IRS allows multiple activities that contribute to the community benefit requirement, the Lown Institute chose to focus on activities that show a direct and meaningful benefit to local communities.

As Dr. Saini emphasized during the webinar: “If hospital’s doctor training programs [and research] were tuned to the community needs, [the Lown Institute] would have a very different view of those.”

To better evaluate the amount hospitals are actually contributing back to their communities, the Lown Institute applied a standard 5.9 percent tax exemption to hospital revenues. Their research revealed a stark fair share deficit across hospitals, which means hospitals were seeing larger tax breaks than they contributed to their communities.

The Lown Institute asserts that what counts as community benefit for hospitals is more of a political process than what is best for the community. There has been some pushback from hospitals about the Hospital Index, with complaints that they are cherry-picking what counts and not valuing research and education enough. The Lown Institute counters that their Index focused on spending that directly impact local communities.

Recommendations for Community Advocacy

While there isn’t a “correct” way for hospitals to provide community benefit, advocates across the country have raised concerns whether the system is actually serving our communities as intended. The Lown Institute’s Hospital Index can be used as a tool for advocates to evaluate and encourage community benefit spending in their local communities.

In New York, advocates rallied outside of New York Presbyterian Hospital to call on the hospital to pay its fair share by highlighting data from the Lown Institute that revealed a $359 million dollar deficit in the hopsital’s community benefit spending.

The webinar revealed further analysis of New York City hospitals from the Lown Institute, which hypothesized the impact if all hospitals in the city paid their fair share back to the community. Their analysis suggested that the city could use the extra tax funds to pay off the medical debt of every patient sued by New York hospitals over the past five years.

Additionally, some states have advocated for further accountability of community benefit spending practices. For example, Oregon established a minimum level of community benefit spending and passed legislation to hold hospitals accountable to their charitable missions, requiring hospitals to provide a sliding scale of debt forgiveness based on Federal Poverty Level and requiring screening for financial assistance before sending patients to collections.

However, in a report released in October 2022, SEIU Local 49 found that ten of Oregon’s largest health systems still failed to comply with financial assistance laws. Their findings highlight how community advocacy remains essential to holding hospitals accountable and ensuring protections are properly implemented.

In addition to the Lown Institute’s Hospital Index, advocates can utilize a set of principles co-created by Community Catalyst with our community and state partners to guide hospitals to improve their billing and collection policies. These tools remain critical to help advocates amplify community voices and hold hospitals accountable to contributing their fair share back into local communities.