Do Central Valley Hospitals Earn Their Nonprofit Tax Breaks?

By Hannah Guzik

Major Central Valley hospitals don’t report enough data to determine whether they earn the extensive tax breaks they get for operating as nonprofits, according to a study released Monday.

“These hospitals get a whopping tax break because they’re supposed to benefit the community as not-for-profits, but the data they report is so sketchy that we truly don’t know if they earn those tax breaks,” said lead author Kerry Sakimoto, health policy fellow at The Greenlining Institute, which conducted the study.

The report examined data from 11 hospitals in Fresno, Bakersfield and surrounding communities between 2011 and 2014.

Hospitals that operate as nonprofits receive large tax breaks in exchange for spending money on services and resources that improve community health.

Researchers found that the nonprofit hospitals in the study spent an average of just .32 percent of their operating budgets on prevention-type programs, known as upstream investments, to improve the health of vulnerable populations. The Central Valley’s low-income communities and communities of color have long faced poor health outcomes, due in part to barriers to care, the report says.

Hospitals varied in the amount they spent on upstream investments for these vulnerable populations, according to the study.

On the high end, Dignity Health’s Bakersfield Memorial Hospital used .86 percent of its 2012 operating budget. But Adventist Medical Centers in Hanford and Selma, and Adventist Health’s Central Valley General Hospital directed less than .001 percent of their 2012 operating budgets toward upstream investments.

The hospitals reported incomplete data on their community spending, making it impossible to fully evaluate their performance, researchers said. In some cases, the poor reporting did not meet legal requirements.

Some hospitals, for example, failed to report specific investments directed toward vulnerable populations. In other instances, hospitals did not submit any community benefit information for a given year.

Hospitals’ community benefit activities are supposed to be based on an assessment of community health needs, but nine of the hospitals in the study used their own employees in focus groups, instead of community members, who bring outside perspectives.

“We were shocked to find that some hospitals’ idea of how to determine community needs was to survey their own staff,” Sakimoto said in a release.

 

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