Determinants of Community-Related Expenses of US Tax-Exempt Hospitals, 2013

Abstract

Context: Tax-exempt hospitals in the United States are required to report community benefit expenses on their federal tax forms. Two categories of expenses critical to the public health mission of hospitals are the "community health improvement" and "community-building" expense categories. The community health improvement expenses formally qualify as a community benefit, whereas community-building expenses do not. Increasing both types of spending would be consistent with the growing evidence on the effects of social determinants on population health.

Objective: To identify characteristics associated with the level of community health improvement and community-building expenses reported by tax-exempt hospitals.

Design: The general acute care hospital is the unit of analysis. We utilize secondary data for all US general acute care hospitals that filed their own Internal Revenue Service Form 990 Schedule H for 2013 (n = 1508). We apply linear regression analysis to an explanatory model with 8 independent variables.

Measures: The primary dependent variables are percentage of operating expenses devoted to community health improvement and to community building. The independent variables include 4 hospital-level measures, 3 county-level measures, and a measure of state requirements for community benefit.

Results: The level of community health improvement expenses is positively associated with bed size, system membership, profit margin, and urban location. In states where tax-exempt hospitals are required to demonstrate community benefit to the state, there is lower community health improvement spending. Teaching hospitals also demonstrate lower community health improvement spending. Results for community-building expenses mirror those for community health improvement except that teaching hospital status and per capita income lose significance and hospital competition gains significance in the negative direction.

Conclusions: Leaders among tax-exempt hospitals in community-related spending are hospitals that are larger, more profitable, members of systems, and located in urban areas and in states that do not have community benefit requirements.