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Nonprofit Hospital System Earnings Far Outweigh Community Benefits

— November 8, 2022

Nonprofit and government-run healthcare systems are reporting high earnings and small benefit percentages.

The nonprofit Atrium Health, the largest hospital system in North Carolina, has announced that in 2019 it offered $640 million in services to Medicare patients that still reman unpaid. Atrium documents losses on the federal health insurance program for seniors and people with disabilities as a community benefit in order to receive tax benefits.

The hospital system claimed $82 million in profits from Medicare and $37.2 million in profits from Medicare Advantage, according to a report released at the end of October by the North Carolina state treasurer’s office. The report concluded that what taxpayers get from local nonprofit healthcare providers in return for tax exemptions is yet to be determined.

“There is no transparency, no accountability, and no oversight,” said North Carolina State Treasurer Dale Folwell, a Republican who is critical of Atrium and other hospitals’ business practices. “With the hospital cartel, it is always profits over people.”

In a statement, spokesperson Dan Fogleman said the hospital system “reported $85 million in services to Medicare patients that weren’t paid for in its most recent cost report to the Centers for Medicare & Medicaid Services. And, as labor, equipment, supplies and inflation continue to drive healthcare costs higher, the gap between Medicare payments and costs incurred to deliver the quality care we provide has grown in the post-Covid inflationary environment.”

Nonprofit Hospital System Earnings Far Outweigh Community Benefits
Photo by Erkan Utu from Pexels

Federal data shows that more than half of the hospitals in the U.S. are nonprofits or government owned. The federal government requires that these hospitals provide emergency room services without consideration of whether or not patients can pay. While the year-end benefit received by tax-exempt systems is based on charitable acts, nonprofits have reported $283 billion in assets from stocks, hedge funds, venture capital, and private equity and other investments in 2019, according to Internal Revenue Service (IRS)’s filings.

“The hospital systems used most of that to produce income and classified only $19 billion, or about 7% of their total investments, as principally devoted to their nonprofit missions,” the analysis found.

The new North Carolina report describes how hospitals’ self-reported Medicare profit margins differed from the financial insights they passed over to the public through IRS records, annual reports, and other documents.

Federal law requires the IRS to review community benefit activities at least once every three years. Yet the agency did not “have a well-documented process to ensure that those activities are being reviewed,” said a 2020 report from the Government Accountability Office (GAO), adding, “The IRS referred nearly 1,000 hospitals nationwide to its audit division for violations of the Affordable Care Act from 2015 to 2019, but the IRS could not identify if they were related to community benefits.”

In response, IRS officials updated the system in 2021 to ensure the agency could identify cases in which hospitals were suspected of not fulfilling requirements.

Vivian Ho, a health economics professor at Rice University in Houston, who worked on the North Carolina report said, “It is critical that the government collects accurate information from hospitals because the data affects all patients.”

To date, it seems that the process continues to be unnecessarily convoluted and corrupt.


Hospitals Said They Lost Money on Medicare Patients. Some Made Millions, a State Report Finds.

Nonprofit Hospitals Offered $110B in Community Benefits in 2019

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