For Immediate Release    Contact:  Jim Campi
March 18, 1998 (202) 467-5300


Washington, D.C. – Citizens Against Government Waste (CAGW) today released a special report examining the tax-exempt status of nonprofit hospitals.  The report, Are You Getting Your Money’s Worth from Nonprofit Hospitals? answers that question by analyzing the level of charity care that nonprofits provide to their local communities in exchange for their tax exemptions.

The report points out that even though hospitals comprise only 1 percent of all nonprofit organizations, they account for 40 percent of total nonprofit revenue.  It is estimated that nonprofit healthcare organizations save $15 billion annually from their exemption from federal, state and local taxes.  Until 1969, the IRS required nonprofit hospitals to provide below cost or free care to the poor and indigent.  But that provision was eliminated by the IRS and replaced with a “community benefit” standard, which includes “promotion of health” and “advancement of medical education.”

“Nonprofit organizations that provide legitimate services to the community are deserving of their tax-exempt status,” said CAGW President Thomas A. Schatz.  “But it has become apparent that many nonprofit hospitals are not providing the kind of charity care that has been traditionally part of their mission.”

In a study of nonprofit hospitals in the Washington, D.C. area, CAGW found that several institutions had huge fund balances ranging between $29 million and $219 million.  CAGW added fund balance to investments and used the hospitals’ own figures on their tax returns to determine charity care as a percentage of the sum.  The charity care provided ranged from less than 1 percent to 27 percent of fund balance and investments.  In addition, CEO salaries for the nonprofits averaged $380,000, which is in line with the for-profit hospital industry.

“The for-profit hospital sector is always being accused of looking out only for the shareholder and investor instead of the community,”  Schatz stated.  “However, CAGW has found that for-profit and nonprofit hospitals aren’t much different in terms of the charity they provide to their respective communities.  The only difference is that taxpayers are subsidizing the nonprofits.  Taxpayers need to make sure that nonprofit hospitals are providing value for their tax exemption by returning true charitable services in exchange for their free ride.”

CAGW is a 600,000-member, nonprofit taxpayer watchdog group dedicated to educating Americans about government waste, fraud, abuse, and mismanagement.

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