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Study Finds In Some states Nonprofit Hospitals Providing Less Community Benefit Than For-profits

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In states where both for-profit and nonprofit hospitals operate, for-profit hospitals had higher unreimbursed Medicaid cost-to-expense ratios than nonprofit hospitals, despite nonprofits receiving tax exemptions for yielding community benefits like providing uncompensated care, writes Healthcare Dive.

According to research published in JAMA Network Open, Texas had the highest ratio of for-profit to nonprofit unreimbursed Medicaid costs to expenses, while New York and the District of Columbia had the lowest ratios, the study found.

Researchers used the 2019 Medicare cost reports to obtain information on self-reported unreimbursed Medicaid costs. Their sample included 3446 private hospitals (2617 nonprofit and 829 for-profit hospitals).

In this economic evaluation, nonprofit and for-profit hospitals had similar unreimbursed Medicaid costs as a share of expenses. In half of the 45 states in which both nonprofit and for-profit hospitals operate, nonprofit hospitals had a lower weighted mean unreimbursed Medicaid cost to expense ratio than for-profit hospitals—but only nonprofit hospitals receive a sizeable tax subsidy. Thus, their results suggest that the largest component of community benefit supposedly provided by nonprofit hospitals (i.e, unreimbursed Medicaid costs, net of supplemental payments) is poorly aligned with the (effectively automatic) tax subsidy that these institutions receive. Prior research suggested similar results for the provision of charity care by nonprofit vs for-profit hospitals.

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