Dissertations and Theses

Date of Degree


Document Type


Degree Name

Doctor of Public Health (DPH)


Health Policy and Management


William Gallo

Committee Members

Shoshanna Sofaer

Diana Romero

Bryan Dowd

Subject Categories

Health and Medical Administration | Health Policy | Health Services Administration | Health Services Research | Public Health


hospitals, nonprofit, community benefit requirements, charity


Introduction: Nonprofit hospital organizations are public charities with complete tax immunity. Such exemptions are worth $24.6 billion and impact the health of hundreds of millions of people, yet what these charities must do to meet the current “community benefit standard” to maintain their tax-exempt status remains a policy debate. To help inform policymaking, an evaluation of four national requirement models was performed: Tax Value Requirement (at least the value of the tax exemptions must be spent on community benefit), Grassley Requirement (at least 5% of revenue must be spent on community benefit), Expense Requirement (at least 3% of expenses must be spent on community benefit), and Facts and Circumstances Requirement (organization must pass a government review).

Objectives: This research aimed to evaluate whether nonprofit hospital organizations’ current community benefit spending would meet each of the four policy models and assess the impact of adding bad debt, Medicare shortfalls, and community building activities. Factors of interest, including organizational size, geography, accounting methods, and fiscal viability, were evaluated within the Grassley and Expense models. The research also aimed to gain insights into the implications of the national policy models and make recommendations to policymakers regarding community benefit law.

Methods: Using a sample of 447 tax returns representing 997 hospitals in tax year 2012, descriptive statistics and evaluations of whether organizations could meet the various national policy models were explored. Additionally, chi-square tests of independence, independent sample t-tests, and logistic regressions were performed on each of the Grassley and Expense models to determine associations with census region, adherence to Healthcare Financial Management Association Statement 15, the number of hospitals filing together, the utilized accounting method, profit margin, the Federal Poverty Level (FPL) income threshold to receive free and discounted care, and the number of employees. To explore whether hospitals are meeting the Facts and Circumstances Requirement and implications of the policy models, key informant interviews with 14 hospital administrators were performed.

Results: Although there was variation in reporting and the analysis assumed no behavioral response to any future policy changes, nonprofit hospital organizations, in aggregate, could satisfy a Tax Value, Grassley, or Expense Requirement. For the Tax Value Requirement, national community benefit spending is 212% of the value of tax exemptions. Approximately 75% and 90% of organizations could meet the Grassley and Expense requirements, respectively. Adding bad debt, Medicare shortfalls, and community building activities increased the ability to meet such standards. For the Grassley Requirement, a policy that adds bad debt may not help hospital organizations to become more forgiving of medical debt while a policy that adds Medicare Shortfalls may help organizations in the Northeast more easily pass the requirement. For the Expense Requirement, a narrow policy (without bad debt, Medicare shortfalls, or community building activities) may help hospital organizations to become more forgiving of medical debt while a policy that is either narrowly defined or one that adds only Medicare shortfalls may help hospital organizations to become more generous with providing discounts on medical debt. Variation exists in whether hospitals could meet a Facts and Circumstance Requirement, although institutional isomorphism is helping to improve community benefit policies and practices.

Conclusions: Even with variation in reporting, nonprofit hospital organizations are claiming sufficient community benefit. While mandating minimum spending may seem a viable policy option, not all activities have a tangible dollar allocation and not all expenditures fit into the current community benefit categories. Given their size, scope, and significance, nonprofit hospitals require flexibility in justifying their tax-exempt status. Policy recommendations to help ensure nonprofit hospitals provide sufficient community benefit are to: assess community benefit with the Facts and Circumstances Requirement, audit more hospitals, mandate competency training, maintain Section 501(r) of the Affordable Care Act and not implement the American Health Care Act of 2017, exclude bad debt and include community building activities and Medicare shortfalls as community benefit, grant nonprofit hospitals access to income data, encourage regional Community Health Needs Assessment (CHNA) partnerships, and modify the CHNA cycle from three to five years.



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