If non-profit hospitals wanted to, they could easily eliminate medical debt for more than 18 million people in America — just with the money that they should be, but are not, spending on the communities they are designed to serve.

This noteworthy calculation comes from the Lown Institute’s 2023 Fair Share Spending Report, released in April. But how is this possible?

Non-profit hospitals do not have to pay federal, state, or local taxes because of the free or discounted care and community health needs programming they provide to their community — typically referred to as “community benefit spending.”

The takeaways from this report are jarring, and leave many questions of how much in tax breaks non-profit hospitals deserve.

In the report, the Lown Institute uses data from 1,773 non-profit hospitals’ IRS 990 forms from fiscal year ending in 2020. They reviewed how these hospitals spent their community benefit, calculated how that compared to their estimated tax break, and noted this discrepancy as their “Fair Share deficit.”

It’s worth pointing out that the report looks at data from 2020, a year filled with difficulties for our health care system — but also a year where non-profit hospitals received billions of dollars in additional funding and support from the federal government. Even so, the fair share deficit was $14.2 billion, with 77 percent of non-profit hospitals spending less on charity care and community investment than their estimated tax break.

The Lown Institute is critical of how broadly hospitals can categorize their spending as a community benefit, and takes a narrower, community-driven approach to their calculations. This has been somewhat controversial and pushed back on by hospitals. The American Hospital Association wrote in its official blog that: “The Lown Institute’s latest report on hospital community benefits, like the previous one, is wrong and cannot be taken seriously as it once again relies on obvious biases and suffers from serious methodological flaws.” However, the Lown Institute defends their methodology “because it’s an open secret that not all spending hospitals can claim as community benefits are actually meaningful for community health.”

The Lown Institute defends their methodology “because it’s an open secret that not all spending hospitals can claim as community benefits are actually meaningful for community health.”

Non-profit status and revenue do not stop these hospitals from going after patients for unpaid medical bills either. In fact, a study from 2022 showed that of the 100 top grossing revenue hospitals in the United States, over a quarter participated in “extraordinary collections actions” against patients with outstanding medical debt. Of those hospitals, 65 percent were non-profits and 30 percent were government owned. An Axios report on hospital billing, in collaboration with Johns Hopkins University, found that 10 hospitals are responsible for 97 percent of the court action against patients. Of those 10, seven are non-profits and two are government owned. Extraordinary collection actions can include, but are not limited to, wage garnishments, placing liens on family homes, legal actions, and other extremes. By law, a non-profit hospital is only allowed to participate in these types of collections if a “reasonable effort” has been made to contact the patients and see if they qualify for the hospital’s financial assistance policy. Yet, these policies are often confusing and require superfluous documentation.

Community Catalyst works closely with advocates across the country on the issue of medical debt and community benefit. For example, the fair share deficit of Pennsylvania is reportedly $1.65 million, which could wipe out almost all medical debts held by Pennsylvanians. Our partners at Pennsylvania Health Access Network (PHAN) are working across the state to remove medical debts, increase patient protections, and create a simpler way for patients to qualify for financial assistance. A major health care player in the state, the University of Pittsburgh Medical Center (UPMC), is prominently featured in the documentary InHospitable for its predatory billing. UPMC’s non-profit status is currently being questioned by the mayor of Pittsburgh.

Georgia Watch is working to fight for a more oversight of hospitals’ ability to merge, expand, and close. Georgia’s non-profit hospitals have a fair share deficit that could save rural hospitals four times over. Instead, major entities like Wellstar are continuing to buy hospitals while shutting down ones they claim are losing revenue — like two in Atlanta who served predominantly Black communities.

In March, Community Catalyst led a coalition which sent two letters – one to the Internal Revenue Service (IRS) and Department of Treasury, and another to the Consumer Financial Protection Bureau (CFPB) – with specific executive actions the administration can take. 

Reports, like that of the Lown Institute, bring to light the inequities that persist in our health care system. They demonstrate in clear numbers and comparisons that many non-profits operate more like for-profit entities, continuing to put their profits over their patients and communities, even during a once-in-a-century pandemic.  

To get involved and add power to our voices, sign our petition on medical debt or share your experience on with us.