Are hos­pi­tals inher­ently char­i­table insti­tu­tions, pro­viding an invalu­able ser­vice to the com­mu­nity? Or are they instead large cor­po­ra­tions making bil­lions of dol­lars and get­ting even richer off the tax breaks afforded by their exempt status?

The jury is still out, according to Gary Young, director of the North­eastern Uni­ver­sity Center for Health Policy and Health­care Research and pro­fessor of strategic man­age­ment and health­care sys­tems. But before we can even face this ques­tion, he said we first need to look at the data sur­rounding it.

Young and his col­leagues in the D’Amore-McKim School of Busi­ness and Bouvé Col­lege of Health Sci­ences car­ried out a first-​​of-​​its-​​kind study pub­lished today  in The New Eng­land Journal of Med­i­cine that com­pares the com­mu­nity ser­vice prac­tices of hos­pi­tals across the nation.

With the passing of Medicare and Med­icaid in 1969, the Internal Rev­enue Ser­vice ended a decades-​​long expec­ta­tion for hos­pi­tals to pro­vide charity care to the extent to which they were finan­cially capable to qualify for tax exemp­tion. Back then, these ser­vices usu­ally took the form of char­i­table care, wherein hos­pi­tals would treat everyone that passed through their doors regard­less of insur­ance status. But with Medicare and Med­icaid, it was assumed there would be no prece­dent for char­i­table care, since everyone would now be insured, Young explained.

Nearly a half-​​century later, it’s now clearer how that panned out. Not only has 15 per­cent of the pop­u­la­tion slipped through the insur­ance cracks, but com­mu­nity ben­efit has also taken on many new roles with the shift toward pre­ven­tive med­i­cine. Addi­tion­ally, hos­pi­tals across the country have come to define “com­mu­nity ben­e­fits” on their own terms, because there is no stan­dard definition.

In advance of the Afford­able Care Act, the IRS adopted a uni­form set of com­mu­nity ben­efit mea­sures to begin to parse out how hos­pi­tals around the country are serving their com­mu­ni­ties, Young said. A form called Schedule H, an appendix to the stan­dard form required of all tax-​​exempt insti­tu­tions (Form 990), is now required by hos­pi­tals not for exemp­tion jus­ti­fi­ca­tion, but simply as a data-​​collection tool.

The first year of reporting on Schedule H was 2009 and now, four years later, Young’s team is the first to look at the story it tells about our nation’s hos­pi­tals. “There is tremen­dous vari­ability,” Young noted. Some hos­pi­tals spend less than 1 per­cent of their oper­ating budget on com­mu­nity ben­e­fits as defined by Schedule H, while others spend more than 20 percent.

Young’s team hypoth­e­sized that the dis­parity would cor­re­late with varying com­mu­nity needs in the hos­pi­tals’ respec­tive com­mu­ni­ties, but after ana­lyzing the data, they found nothing of the sort. Com­mu­ni­ties with the highest per­centage of unin­sured res­i­dents saw only minor increases in the amount of com­mu­nity ben­e­fits, including charity care, pro­vided by their local hospitals.

Many argue that Schedule H doesn’t include all forms of com­mu­nity ben­efit, so it doesn’t pro­vide an accu­rate pic­ture, Young said. For example, hos­pi­tals often pro­vide care to unin­sured patients who do not meet their charity care guide­lines but ulti­mately fail to pay their bill issued by the hos­pital. This is called bad debt and it is not included in the IRS’ set of com­mu­nity ben­efit measures.

Young did find one cor­re­la­tion, how­ever. Six­teen states have required their hos­pi­tals to report more strin­gently on com­mu­nity ben­e­fits prac­tices for sev­eral years. These hos­pi­tals happen to con­tribute some of the highest amounts of com­mu­nity ben­e­fits in the country. Young warned that this cannot be con­sid­ered a causal link, but sug­gested the increased trans­parency may encourage increased com­mu­nity benefit.

While the new data may raise more ques­tions than it answers, it sheds new light on the role hos­pi­tals play in our com­mu­ni­ties, Young said. And though the debate on the jus­ti­fi­ca­tion for hos­pital tax exemp­tion will undoubt­edly con­tinue, it will now be sig­nif­i­cantly more well-​​informed.

Young and his team will present the find­ings and engage in a public dis­course about the topic at the National Health Policy Forum in Wash­ington, D.C. on April 26.