Subsidizing health care providers through the tax code: status or conduct?

Abstract

The merits of tax exemption for nonprofit health care providers have been hotly debated for decades. Mark Schlesinger and Brad Gray provide a useful, dispassionate meta-analysis of past research; they conclude that there are real differences in the performance of nonprofit and for-profit hospitals and nursing homes, although they vary along several key dimensions. Unfortunately, their findings offer no insight on whether these differences are large enough to justify a sizable subsidy and whether it makes more sense to use an undifferentiated subsidy tied to status (current practice), or a graduated subsidy tied to quantifiable and objective measures of performance.