Hospitals' provision of community benefits during the economic recession: An analysis of hospitals in Maryland

During the recent economic recession, not-for-profit (NFP) hospitals saw their profit margins decline as a result of lower patient volumes, higher shares of uninsured and publicly insured patients, and reduced investment income. To weather the economic storm, most hospitals implemented significant changes including cutting administrative costs, reducing staff, and curtailing services. Little is known currently, however, about whether NFP hospitals altered their provision of community benefit services during these difficult economic times. This study uses data from community benefit reports for Maryland hospitals for 2007–2009 to describe how hospitals' provision of community benefits changed during the recession. The findings show that hospitals' expenditures on community benefits as a proportion of total operating expenses increased from 6.1 percent in 2007 to 6.7 percent in 2009 (+10 percent). Most of this increase was driven by increases in charity care (+25 percent) and money-losing health services (+36 percent). At the same time, hospitals' spending on community benefits as a proportion of net income skyrocketed. While hospitals spent roughly the equivalent of their net income on community benefits in 2007, spending as a proportion of net income rose to over 570 percent in 2009. These findings are among the first to demonstrate that NFP hospitals did not cut their community benefit spending during the recession. Instead—likely as a result of increased need in the community—spending on critically needed services, such as outpatient mental health and hospice programs, increased despite the substantial reductions in income that many hospitals experienced during the recession.