Key Takeaways
- California’s nonprofit hospitals are exempt from paying federal and state taxes if they meet certain standards, including a requirement to fund a set of locally focused charitable activities called “community benefits.”
- California’s nonprofit hospitals reported spending $8.7 billion on community service activities in 2020.
- California policymakers could consider policy options to align community benefit spending with other health care initiatives, improve the availability of public information on community benefit spending, and measure outcomes to ensure that community benefit spending is achieving its intended objectives.
California nonprofit hospitals are exempt from paying federal and state taxes if they meet certain criteria set forth by the Internal Revenue Service, the Affordable Care Act, and state law. These criteria include an obligation to fund a set of community-focused charitable activities called “community benefits.”
This report provides a comprehensive picture of the scope and practice of community benefits in California’s nonprofit hospitals. The report is based on the national literature, California community benefits regulations and laws, community health needs assessments and community benefit plans submitted by California’s nonprofit hospitals, available financial data on community benefit expenditures, and 49 stakeholder interviews.
Key findings include:
- What are the most common community health priorities identified by California’s nonprofit hospitals? More than nine in 10 (92%) nonprofit hospitals cited access to care as a health priority that benefits their community. Mental/behavioral health was also a common priority, selected by 84% of hospitals.
- How much do California’s nonprofit hospitals spend on serving their communities? U.S. hospitals reported community service spending of more than $93 billion in 2020, of which $8.7 billion was from California hospitals.
- What is the value of uncollected taxes from California’s nonprofit hospitals? No hard estimates have been released, but experts estimate it to be between $2.6 billion and $2.8 billion in 2020, though past studies have suggested the figure could be much higher.
- What are the common themes in the academic literature on the impact of community benefit spending across the country? Many scholars conclude that the impact of community benefit spending is not commensurate with the value of the tax benefits.
- What are California stakeholders saying about the impact of community benefit spending in the state? Interviewees in this study were sharply divided in their assessment of the impact of community benefit on community health care in California: While interviewees from the hospital industry took great pride in their community benefit programs, most interviewees from industries outside the hospital industry expressed great concern.
