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Not-for-profit hospitals say their tax exemptions are justified. Photo: Carolinas HealthCare

Sen. Chuck Grassley recently had sharp words for not-for-profit hospitals, following a Politico investigation that looked at how hospitals have cut back on charity care since the Affordable Care Act went into effect but still reap major financial benefits by not paying federal, state and local taxes.

The latest: The American Hospital Association released a report last week that said the benefits not-for-profit hospitals provide to their local communities far outweigh foregone federal tax revenue. But experts say the AHA's report has flaws and omissions that exaggerate hospitals' community roles and understate the power of their tax exemptions.

The AHA's report says hospitals provided $67.4 billion worth of community benefits in 2013 — including free charity care for their poorest patients, underpayments from Medicare and Medicaid, and "community building activities." The government missed out on collecting $6 billion that same year in federal taxes from tax-exempt hospitals, the report said.

There are some holes in the report:

  • The AHA did not account for the giant tax break hospitals get on their property, "which is just a joke," said Craig Garthwaite, a health economist at Northwestern University. "Exclusion of property taxes would be a very major problem," added Gary Young, a health policy professor at Northeastern University who has studied tax exemptions for not-for-profit hospitals.
  • Calculating shortfalls from Medicare as a community benefit also raises a red flag. For-profit hospitals that pay taxes treat Medicare patients. The IRS doesn't acknowledge Medicare shortfalls as a community benefit. And research shows hospitals often lose money from Medicare because of their high fixed costs and inefficiency, not because payments are too low. "That's really just trying to get that (community benefits) number as high as possible," Garthwaite said.
  • The AHA used 2013 data for its report. The outdated data don't reflect how the ACA's coverage expansions in 2014 eased some financial burdens on hospitals, said Garthwaite, who has studied how the ACA has reduced hospitals' uncompensated care.

AHA's response: Mindy Hatton, the American Hospital Association's top lawyer, responded with a statement to Axios. The report did not include property tax values, she said, because the analysis only covered federal exemptions, which "Congress has jurisdiction over." Hatton also said 2013 "is the most recent year for which tax information is available." When it was mentioned there are much more recent tax forms available at GuideStar, Hatton said her group collects data directly from hospitals "rather than rely on outside sources."

Go deeper

16 mins ago - Politics & Policy

McConnell drops filibuster demand, paving way for power-sharing deal

Senate Majority Leader Chuck Schumer (R) and Minority Leader Mitch McConnell attend a joint session of Congress. Photo: Olivier Douliery/AFP via Getty Images

Senate Minority Leader Mitch McConnell has abandoned his demand that Democrats state, in writing, that they would not abandon the legislative filibuster.

Between the lines: McConnell was never going to agree to a 50-50 power sharing deal without putting up a fight over keeping the 60-vote threshold. But the minority leader ultimately caved after it became clear that delaying the organizing resolution was no longer feasible.

Scoop: Google won't donate to members of Congress who voted against election results

Sen. Ted Cruz led the group of Republicans who opposed certifying the results. Photo: Stefani Reynolds/Pool/AFP via Getty Images

Google will not make contributions from its political action committee this cycle to any member of Congress who voted against certifying the results of the presidential election, following the deadly Capitol riot.

Why it matters: Several major businesses paused or pulled political donations following the events of Jan. 6, when pro-Trump rioters, riled up by former President Trump, stormed the Capitol on the day it was to certify the election results.

2 hours ago - Politics & Policy

Minority Mitch still setting Senate agenda

Illustration: Aïda Amer/Axios

Chuck Schumer may be majority leader, yet in many ways, Mitch McConnell is still running the Senate show — and his counterpart is about done with it.

Why it matters: McConnell rolled over Democrats unapologetically, and kept tight control over his fellow Republicans, while in the majority. But he's showing equal skill as minority leader, using political jiujitsu to convert a perceived weakness into strength.

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