Most U.S. Nonprofit Hospitals Neglect Community Investment Obligation

72% don't follow through on expected charity commitments, resulting in $17B in unrealized community investment, new study says.

Cleveland Clinic, Massachusetts General, Vanderbilt University Medical Center, and several other nonprofit blue-chip providers enjoy large tax breaks, but fall short in making appropriate community health investments, says a new study from the Lown Institute, a healthcare think tank.

Nonprofit hospitals collectively failed to invest nearly $17 billion in their communities, says the analysis released today from Lown Institute's 2021 Hospitals Index.

The Lown Hospitals Index 2021 Community Benefit ranking examined 3,641 hospitals based on their Medicaid revenue, charity care spending, and other investments that have direct benefit to the community—health clinics, housing, and food security. Data sources include hospital cost reports filed with the Centers for Medicare and Medicaid Services and IRS 990 forms, both from 2018.

The institute, for the first time, calculated “fair share deficits” for private nonprofit hospitals, by comparing each hospital’s spending to the value of its tax exemption. Of the 2,391 hospitals included in this part of the study, 72 percent were found to have a fair share deficit, ranging from a few thousand dollars to $261 million.

Hospitals that dedicated at least 5.9 percent of overall expenditures to charity care and meaningful community investment were considered to have spent their fair share. The 5.9 percent threshold is based on established research into the valuation of the nonprofit tax exemption.

Largest fair share deficits

Except for Vanderbilt University Medical Center, the 10 hospitals with the largest fair share deficits all appear on US News & World Report’s 2020-2021 Honor Roll. These hospitals account for more than 10%—$1.8 billion—of the nation’s total fair share deficit:

Performance varied widely, even among hospitals in the same city, where hospitals face similar tax rates and their communities have similar needs and similar rates of uninsurance, the study said. In Boston, for example, Boston Medical Center had a fair share surplus of $11 million. Massachusetts General Hospital (MGH), by contrast, had a community benefit spending deficit of $179 million.

"The MGH has long been committed to supporting the needs of our diverse communities, improving the health and well-being of those we serve, and working within the community to address social determinants of health," according to a statement from Joseph Betancourt, MD, MPH, senior vice president for Equity and Community Health at MGH.

"During the past decade, the MGH has earned major national recognition from the American Hospital Association and the Association of American Medical Colleges for its work in and contributions to community health and health equity," he said. "The MGH has not yet seen the Lown Institute’s most recent report, but when it is available, we will be reviewing the methodology and findings to determine how the rankings were compiled."

HealthLeaders reached out to all hospitals on the deficit list. These are the statements, edited for length, of those that responded:

University of Michigan Health System

“University of Michigan Health has a strong tradition of supporting and directly providing programs in our communities. Michigan’s Medicaid expansion and other programs under the Affordable Care Act have enabled us to accelerate our efforts to get more patients covered for their health care, which led to improved healthcare access for the most vulnerable Michiganders and a reduction in our charity care expenditures."

"Many of our community investments to increase health equity—such as school-based health centers (safety net clinics) and older adult services—are not reflected in this methodology."

Vanderbilt University Medical Center

“For the most recent fiscal year, Vanderbilt University Medical Center provided more than $829 million in charity care and other community benefits in service to the citizens of Tennessee. These funds support direct patient care and a range of initiatives that positively impact Tennesseans in other ways through improvements in community health."

"The analysis by this organization allows only certain financial measures to be counted while intentionally excluding other beneficial activities traditionally supported by academic medical centers like VUMC that require considerable financial commitment.”     

Brigham and Women's Hospital

"Brigham and Women’s Hospital is committed to its surrounding communities and investing in the people, neighborhoods and businesses that comprise them. An essential part of our mission, this commitment is reflected in many initiatives across our Center for Community Health and Health Equity which are informed by an extensive Community Health Assets and Needs Assessment process."

"These include grants to local nonprofits, prevention and wellness activities that address the social factors that contribute to poor health outcomes, programs aimed at reducing violence and at improving birth outcomes, supporting young parents and their families, and advancing educational, employment and career development opportunities for young people."

Cleveland Clinic

"Cleveland Clinic remains committed to the communities we serve. In 2019, our total community benefit increased 12% to $1.16 billion, representing the highest level in our reporting history. Community benefit is a measure of a hospital’s investment in its community through education, research, financial assistance and Medicaid shortfall, subsidized services, and outreach programs."

"As a 100-year-old nonprofit hospital system, Cleveland Clinic is a community asset with no owners, investors, or stockholders. Any and all extra funds from operations are invested back into the health system to support patient care, research, education, and long-standing charitable efforts."

Cedars-Sinai Medical Center

"The study ignores many of the most important community contributions of independent, nonprofit academic medical centers, and does not accurately reflect how we serve our communities. For example, the study excludes all academic medical centers’ financial contributions to research and education; the report’s conclusion that “these investments do not have a direct impact on the health of its community" would come as a big surprise to the millions of people in underserved communities and communities of all types around the country and the world whose lives were saved or improved because of the research funded by academic medical centers."

"Nor does it account for the impact that the educational mission of academic medical centers have in addressing the chronic shortages of health professionals. Also, it neglects to account for the fact that Medicaid and Medicare cover only a fraction of an academic medical center’s actual cost of care. When these community benefit contributions are appropriately included, Cedars-Sinai’s total community benefit contribution for Fiscal Year 2020 was $723,512,000 (18% of total expenses)."

Best performers

The 10 hospitals that performed the best overall in community health investment were:

1. Paradise Valley Hospital (National City, California)
2. Elmhurst Hospital Center (Elmhurst, New York)
3. Queens Hospital Center (Jamaica, New York)
4. Metropolitan Hospital Center (New York, New York)
5. Woodhull Medical and Mental Health Center (Brooklyn, New York)
6. Leonard D. Chabert Medical Center (Houma, Louisiana)
7. NYC Health + Hospitals Coney Island (Brooklyn, New York)
8. Lallie Kemp Medical Center (Independence, Louisiana)
9. Zuckerberg San Francisco General Hospital (San Francisco, California)
10. The University Hospital (Newark, New Jersey)

"Hospitals say they want to be great community partners, and the ones at the top of our list have followed through," said Dr. Vikas Saini, president of the Lown Institute. "With the pandemic shining a light on health inequity in America, we need more hospitals to give back as much as they take in tax breaks."

Additional information, including an explanation of methods, is available at the Lown Institute Hospitals Index website. A launch of the full 2021 Lown Institute Hospitals Index, including rankings across more than 50 metrics, will take place in the early fall.