The Provision of Charity Care by Nonprofit Hospitals

As part of an unwritten ‘social contract,’ nonprofit hospitals receive exemptions from federal and state property taxes in return for providing uncompensated care to community members who would otherwise be unable to afford the medical costs. However, literature has long debated the question of whether or not the tax exemptions are justified. In 2009, the federal government passed legislation mandating the public reporting of community benefit activities, instantly improving the standardization and transparency of reporting measures. Using IRS Form 990 Schedule H data from 212 hospitals across 18 states, this study uses a multivariate panel data model to assess for the impact of state-level regulations on nonprofit hospital community benefit behavior. Three dependent variables (charity care, total charity care and total benefits) and four types of regulations were examined. Results suggest that policies can influence community benefit provision, but the level of efficacy varies by regulation.