Paying Their Way? Do Nonprofit Hospitals Justify Their Favorable Tax Treatment?

Abstract

This study addresses the effect of hospital ownership on the delivery of services to medically indigent patients and on their communities, using two alternative definitions of community benefits. Using data from hospitals in California, the study finds that in similar markets, the amount of community benefits provided by a tax-exempt private hospital is equivalent in value to that provided by an investor-owned hospital. These results are sensitive to the definition of community benefits, thus indicating need for a more explicit identification and minimum standard of the community benefits expected of nonprofit hospitals in return for their special tax treatment.