Whether nonprofit hospitals fulfill their implicit obligation to provide benefits to the public that are commensurate with the benefits associated with their tax exemptions is an important policy question. To contribute to this discussion, we examine the variation in charity care provided, scaled by net patient revenues and by imputed federal income taxes, in a sample of nonprofit hospitals that are subject to Single Audit requirements. We find that small hospitals tend to provide more charity care than large hospitals, and that rural hospitals tend to provide more charity care than urban hospitals. Interestingly enough, we find little difference in charity care amounts provided by hospitals in high income areas v. low income areas, suggesting that demand for charity care, at least in this setting, has little effect on hospital behavior regarding the provision of charity care. As a result of our analyses, we make recommendations for increased availability of hospital financial statements, as well as specific disclosures of other components of community benefits, which represent the applicable standard for evaluating tax exemptions. These recommended disclosures and increased transparency would permit more meaningful policy analysis regarding nonprofit hospitals as well as a comparison to for-profit and governmental hospitals.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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