News: Nonprofits cutting back on charity care amidst profit growth, study finds

From 2012 to 2019, the mean operating profits for nonprofit hospitals grew from $43 million to 58.9 million, according to a new study published by Health Affairs. During this time, the mean cash reserve balances also increased from $133.3 million to $224.3 million, but such increases were not associated with the provision of more charity care by nonprofit hospitals. During that time, charity care spending instead dropped from $6.7 million to $6.4 million, HealthLeaders reported.

According to the researchers of the study, as many finance leaders fight against poor operating costs, the development toward and execution of a financially sustainable future seems to have occurred at the expense of charity care. They point out that the IRS hasn’t stated specific quantitative requirements for nonprofit hospitals to provide as far as community benefits, but linking minimum contributions to charity care with profit increases may be helpful in the future.

Other reports aside from Health Affairs have analyzed nonprofit charity care spending in the last few years, as it is a requirement for nonprofit hospitals to keep their tax-exempt status. In response, hospitals have pointed out that such analyses allow only certain financial measures to be counted.

Editor’s note: To read HealthLeaders’ coverage of this story, click here. To read the Health Affairs study, click here.