Apr 22, 2024 - News

Report: Metro Detroit hospitals' tax breaks exceed community spending

Illustration of a stethoscope made from a coin.

Illustration: Shoshana Gordon/Axios

A national think tank focusing on health care solutions found that nonprofit hospitals across Metro Detroit spend hundreds of millions less on community health investments than they receive in federal, state and local tax breaks.

Why it matters: Such shortfalls, known as "fair share" deficits, are permissible under federal requirements for tax-exempt hospitals. However, the severity of these deficits has spurred calls for more robust regulation as Americans cope with medical debt and chronic illness.

The big picture: About 80% of 2,425 nonprofit hospitals nationwide received more in tax breaks than they gave back to their communities in 2021, the most recent year financial data was available, a new report from the Boston-based Lown Institute found.

  • Those hospitals had a combined "fair share" shortfall of $25.7 billion.
  • The American Hospital Association has disputed the institute's methodology, claiming it cherry-picks types of community-based spending while ignoring underpayments from Medicare and Medicaid and expenditure on research and training.

Zoom in: Henry Ford Hospital in New Center had the country's 11th-highest "fair share" deficit, and the highest in Michigan, Lown found in an analysis for Axios Detroit of nonprofit hospitals in the tri-county area.

  • Lown estimated the hospital's 2021 tax exemptions were worth $195 million, and it reported to the IRS $54 million worth of community investments that Lown considered meaningful.
  • Lown's analysis found similar "fair share" deficits at Henry Ford hospitals in Macomb County ($26 million), West Bloomfield ($19 million) and Wyandotte ($14 million).

Between the lines: Henry Ford Health has joined Michigan State and the Detroit Pistons on a $3 billion project to redevelop part of New Center with a hospital expansion, 662 new apartments and a new MSU research center.

By the numbers: The institute's analysis of Metro Detroit's 2021 spending at nonprofit hospitals also found "fair share" deficits elsewhere:

  • Beaumont Health had eight hospitals with a combined $165 million deficit.
  • Ascension had four hospitals with a combined $125 million deficit.
  • Trinity Health had two hospitals with a combined $58 million deficit, and McLaren Health Care had two with a combined $33 million deficit.

What they're saying: "Everyone wants to see their local hospital thrive, but not at the expense of the communities they serve," Dr. Vikas Saini, Lown Institute president, said in a statement.

  • "Though hospitals are required to report their community contributions to the IRS, there is no minimum spend, many loopholes and enforcement is practically nonexistent."

The other side: Henry Ford, Beaumont, Ascension and Trinity Health disputed the methodology Lown Institute used to compare the value of nonprofit hospitals' tax breaks with their community investments.

  • "It does not include some of the crucial community benefits we provide, including the underfunded costs of government programs like Medicaid and Medicare," a spokesperson for the health system said in a statement to Axios Detroit.
  • Henry Ford asserts it spent more than $700 million on "uncompensated care and community benefits" in 2021.
  • An Ascension spokesperson told Axios that it provided nearly $2.3 billion last year in community benefits and care for those living in poverty.
  • Nationally, Trinity Health says it reported $1.5 billion in total community benefits in 2023.

What's next: Lown urges policymakers to consider reforms already taken up in states like Massachusetts, Oregon and Colorado.

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