Illinois and Utah created spending requirements for hospitals based on the property taxes they would have been assessed as for-profit organizations.Īnd a congressional committee in April heard testimony on the issue. In 2019, Oregon passed legislation to set floors on community benefit spending largely based on each hospital’s past expenditures as well as its operating profit margin. KFF Health News reported last year that more than 100 million Americans are saddled with medical bills they can’t pay, and has documented aggressive bill-collection practices by hospitals, many of them nonprofits. The growing interest in how tax-exempt hospitals operate - from lawmakers, the public, and the media - has coincided with a stubborn increase in consumers’ medical debt. More than a dozen states have considered or passed legislation to better define charity care, to increase transparency about the benefits hospitals provide, or, in some cases, to set minimum financial thresholds for charitable help to their communities.
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In exchange for these savings, hospitals are supposed to provide community benefits, like care for those who can’t afford it and free health screenings. The Pottstown case reflects the growing scrutiny of how much the nation’s nonprofit hospitals spend - and on what - to justify billions in state and federal tax breaks. “The ruling sent a warning shot to all nonprofit hospitals, highlighting that their state and local tax exemptions, which are often greater than their federal income tax exemptions, can be challenged by state and local courts,” said Ge Bai, a health policy expert at Johns Hopkins University. The court decision, which Tower Health is appealing, stunned the nonprofit hospital industry, which includes roughly 3,000 nongovernment tax-exempt hospitals nationwide. It cited the “eye-popping” compensation for multiple Tower Health executives as contrary to how Pennsylvania law defines a charity. The school system appealed Pottstown Hospital’s new nonprofit status, and earlier this year a state court struck down the facility’s property tax break. “We have less curriculum, less coaches, less transportation,” said Superintendent Stephen Rodriguez. It cut teacher aide positions and eliminated middle school foreign language classes. The district, about an hour’s drive from Philadelphia, had no choice but to trim expenses. It also no longer had to pay local property taxes, taking away more than $900,000 a year from the already underfunded Pottstown School District, school officials said. The takeover by Tower Health meant the 219-bed Pottstown Hospital no longer had to pay federal and state taxes.
The public school system here had to scramble in 2018 when the local hospital, newly purchased, was converted to a tax-exempt nonprofit entity.
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