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To sustain their tax-exempt status as well, nonprofit hospitals must now avoid 'excessive compensation' for their officers, directors, and trustees, thus answering the criticism that nonprofit hospitals devote too high a percentage of their earnings to administrative costs, rather than care (IRS-exempt, 2009, IRS). There remains a clear need for nonprofits, based upon the available data on the population served by these hospitals and the additional services offered by nonprofits to the community. "Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study… medical education and training (23%), research (15%), and community programs (6%)" (IRS-exempt, 2009, IRS: 2-3).
To answer criticisms, California can impose more stringent standards upon hospitals with tax-exempt status, given there remains evidence that not all nonprofits are equally beneficial to the community. "Uncompensated care and community...
For example, 9% of the hospitals reported 60% of the aggregate community benefits expenditures of the overall group; 14% of the hospitals reported 63% of the aggregate uncompensated care expenditures" (IRS-exempt, 2009, IRS: 2-3). To incur some cost savings, a more stringent review process may be advisable but doing away with the exemption for nonprofits entirely seems unwise, particularly given the public health consequences of a burgeoning untreated population within the state.
References
Are non-profit hospital tax exemptions unfair to taxpayers? (2010, July 9). National Coalition on Health Care (NCHC). Retrieved July 6, 2011 at http://nchc.org/content/are-non-profit-hospital-tax-exemptions-unfair-taxpayers
IRS-exempt organizations hospital study: Executive summary of final report. (February 2009).
IRS. Retrieved July 6, 2011 at http://www.irs.gov/pub/irs-tege/execsum_hospprojrept.pdf
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