Not-for-profit hospitals' provision of community benefit beyond charity care: Is there a trade-off between free medical care and other health services provided to the community?

With over 45 million uninsured, not-for-profit (NFP) hospitals spend substantial resources on charity care to justify their tax exemptions. Once the Patient Protection and Affordable Care Act is successfully implemented, however, many uninsured individuals will have access to health insurance, which will noticeably reduce the need for free medical care. Community benefits other than charity care will thus gain in importance, yet little is known currently about NFP hospitals' total community benefit spending. Using data from community benefit reports for California hospitals for 2008, this study describes the extent to which NFP hospitals provide community benefits other than charity care and then analyzes whether there is a trade-off between expenditures on charity care and other community services. We find that, in 2008, the average California hospital spent $247 and $773 in charity care and unreimbursed care under means-tested government programs per discharge, respectively, while spending on all other community benefits amounted to $179. Hospitals that provided more charity care also spent more on unreimbursed care (Spearman's rho=0.30 with p<0.01) as well as services provided to the community at large (Spearman's rho=0.26 with p<0.05). These seminal findings provide empirical evidence that hospitals do not trade off between charity care and other health services provided to both the most vulnerable populations and the community at large. Hospitals that have traditionally provided substantial amounts of free care in return for their tax benefits may thus be able to maintain their tax-exempt status by providing other types of community benefits to the communities they serve.