New York’s nonprofit hospital sector receives tax breaks worth more than $2 billion each year, with the expectation that they’ll provide free services and invest in their communities. But dozens are falling short on community benefit spending, a new report shows.
More than 40% of the nonprofit hospitals in New York spent less on community benefits than they received in tax exemptions between 2020 and 2022, according to an analysis of 132 hospitals released Wednesday by the Lown Institute, a Needham, Mass.-based think tank that publishes research on hospital social responsibility.
Hospitals that failed to invest enough in charity care and other measures to offset their tax exemptions had a combined spending gap of $518 million, the report found.
The findings highlight persistent concerns about nonprofit hospitals’ community benefit spending, which has sparked debate between the industry and health advocates who say that nonprofits have become too focused on preserving their bottom line. Though hospitals get significant tax breaks tied to their nonprofit status, there are no requirements outlining how much they should spend on financial assistance, free health clinics and other benefit measures.
“Hospitals that enjoy a tax exemption enjoy that because of an assumption that they are in the business of taking care of people – more than in the business of business,” said Dr. Vikas Saini, president of the Lown Institute, noting that there are plenty of opportunities for hospitals to invest in their communities.
New York hospitals recorded a wide gap between their tax breaks and benefit spending, but local hospitals still spend more on charity care and other measures on average compared to other states, according to the report. The proportion of hospitals that recorded a spending gap in the most recent report is lower than 70% the Lown Institute recorded last year; but the more recent findings analyze a three-year period during the height of the Covid-19 pandemic, when hospitals were providing higher levels of charity care and donating protective equipment. The pandemic could have contributed to the smaller proportion of hospitals with a spending deficit, Saini said.
Brian Conway, a spokesman for the lobbying group Greater New York Hospital Association, called the Lown Institute’s report “a make-believe analysis that’s convenient for their anti-hospital agenda.”
Conway pointed to a report commissioned by the industry group earlier this year which found that city hospitals spent $9 billion on community benefits in 2022, amounting to 17% of their total operating expenses. The report factors spending on Medicaid patients into its analysis, which the Lown Institute does not.
City hospitals topped the list of institutions that underspent on community benefits, according to the Lown Institute’s report. NYU Langone spent an annual average of $93 million less on community benefits than it received in tax breaks, while New York-Presbyterian spent an average of $59 million less, the analysis found.
Dr. Fritz François, executive vice president, vice dean and chief of hospital operations at NYU Langone, said “it is unfortunate that the Lown Institute has continued to cherry-pick elements of their methodology.”
NYU Langone spent more than $2.7 billion on community benefits in 2023, a figure that has grown for the last several years, according to François. NYU’s analysis includes measures such as lost revenue for government payors and training for medical residents, which the Lown Institute does not take into account. François added that the institute’s analysis also fails to consider quality measures, such as low readmission or mortality rates.
Some hospitals invested more in benefits to their community than the value of their tax exemptions. North Shore University Hospital, part of Northwell Health, spent $217 million more on community benefits than the value of its tax breaks, while Northwell’s Long Island Jewish Medical Center had a surplus of $152 million. East Flatbush safety-net hospital One Brooklyn Health also recorded a surplus of $74 million, the report found.
Hospitals in the city have higher property taxes than other parts of the country and the state, with the city’s nonprofit hospital sector owning more than $3.6 billion in real estate. The larger tax breaks associated with city properties partly contribute to the lower share of community benefit spending among hospitals in Manhattan; though Northwell’s Lenox Hill Hospital on the Upper East Side recorded a $67 million surplus, the report found.
NYU Langone and New York-Presbyterian have higher operating margins compared to other city hospitals – a predicament that Saini said should raise scrutiny over their community benefit spending.
“Hospital leadership does have to keep the lights on,” Saini said. “But what’s that margin for?”
