According to an Ernst & Young study released February 2, 2012, not-for-profit hospitals spent an average of 11 percent of their total expenses on benefits to their communities in 2009.
The study, prepared for the American Hospital Association, found that direct benefits to patients in financial need, which include free care, financial assistance, and spending to fill gaps in Medicare underpayments, averaged 5.7 percent of total hospital expenses.
The report compared hospitals of similar size so that communities could better understand their hospitals’ benefits to their community.
Starting in 2009, not-for-profit hospitals were required to file Schedule H with the Internal Revenue Service to show the community benefit they provide. AHA said it wanted to better understand the diverse ways hospitals serve their communities and worked with Ernst & Young to collect and analyze data from 571 not-for-profit hospitals.
Schedule H requires hospitals to report benefit to the community through questions on: free or discounted care, Medicaid underpayments, health research, education, bad debt expense attributable to patients eligible for financial assistance, Medicare shortfalls, and other community benefits and building activities.
The report also found that more than 75 percent of participating hospitals and systems have Medicare reimbursement shortfalls, which should be treated as community benefit. By continuing to treat patients eligible for Medicare, hospitals alleviate the federal government’s burden for directly providing medical services.
The IRS also recently acknowledged that lessening the government burden associated with providing Medicare benefits is a charitable purpose.