Hospitals should not be exempt from taxes

January 10, 2014

A reader says that hospitals are no longer operating in a way that they no longer deserve to be exempt from property taxes.

Healthcare systems and hospitals are considered nonprofit entities, which exempts them from taxes. Private medical practices and other physician-owned healthcare resources are taxed by county, state, and federal governments as for-profit entities. Does the “nonprofit” tax-free designation still fit healthcare systems and hospitals?

In some states, laws mandate hospitals reporting of charity care to maintain their tax-free status. In California, federal and state laws don’t require nonprofit hospitals to provide certain amounts of charity care and community benefits to qualify for tax exemptions. In Illinois, hospitals get clear criteria for charity care and tax exemptions, thanks to recent legislation.

A regional nonprofit, multiple-hospital system comes to mind. It owns profitable real estate, including ambulatory surgical centers and a multi-practice building with an urgent care center, a sports medicine center, and a “medical spa.” It partners with for-profit national retail pharmacy clinics. Its total revenue in 2012 was over $1 billion. Its chief executive officer earns $3 million plus benefits annually.

Anyone who has ever looked at a “manufacturers suggested retail price” hospital bill knows that health systems and hospitals charge up to 2000% over the cost of each item. When a hospital writes off their mega-inflated cost overruns for no-pay patients, it is declared a charity care loss so as to maintain their nonprofit tax- exempt status.

This financial maneuvering saves health systems and hospitals billions in taxes every year. It costs taxpayers and businesses the same as they make up for those lost taxes.

It seems these institutions are quite profitable. It is logical to assert, therefore, that they should be evaluated to lose their “nonprofit” tax-exempt status. I am sure the federal government, states, and counties would like to have a word with their health systems and hospitals. Perhaps it is time they did.

Craig M. Wax, DO

Mullica Hill, New Jersey