Charity Care and Profit

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NOT-FOR-PROFIT HOSPITAL DISCLOSURES
MARGIN AND MISSION
25%

= hospital or local system
Of 113 profitable hospitals surveyed, 66, or 58.4% reported less-than-average charity care

20% 15%

10% 5%

Profit Margin

0

-5%

-10%

2.5%
-15% -20%

Average amount of total expenses (excluding bad debt) that hospitals spent on providing charity care

5%
Threshold proposed by staff members for Sen. Chuck Grassley in 2008 to define whether hospitals could claim exemption from taxes

-25%

-30% -35% 0 2% 4% 6% 8% 10% 12%

Cost of Charity, as Percentage of Total Expenses

CHARITY OR DEBT Many hospitals surveyed told the IRS that a portion of their bad debt----owed
by patients who were billed but didn't pay----would have qualified for charity care
Number of hospitals

83

19

8

23

8 4 3 >50-60% 4 >60-70% 2 >70-80% 2 >80-90%

Bad debt percentage called charity

None

>0-10%

>10-20%

>20-30%

>30-40%

>40-50%

STACKING IT ALL UP 8.3% of total expenses is the average that hospitals devoted to community benefits recognized by the federal government. 2.5%
Charity care at cost

10.6% of total expenses is the average that hospitals
devoted to items not recognized by as community benefit by the federal government.

3.3%
Unreimbursed Medicaid expenses

2.5%

1%

2.3%
Bad debt, at cost

7.3%
Unreimbursed Medicare expenses, at cost

“Community building” activities

“Other benefits” including research, medical resident education and clinical services on which the provider takes a financial loss
Source: Modern Healthcare analysis of IRS Form 990 tax disclosures for 156 hospitals filing for tax year 2009 MODERN HEALTHCARE GRAPHIC/ERIC SEMELROTH

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