Radiologists and other physicians want greater scrutiny around hospitals’ nonprofit status

Radiologists and other physicians want increased scrutiny around hospitals’ nonprofit status, the American Medical Association said Monday. 

Docs at the AMA’s Interim Meeting in Orlando, Florida, have voted to support greater oversight of nonprofit hospitals and to standardize charity care policies so that financial assistance “reaches patients in need.” 

Earning this key designation exempts institutions from paying income, property and sales taxes. This results in billions of dollars of savings each year, with the tradeoff that hospitals provide free care and other services to the less fortunate. However, nonprofit status may be subject to abuse, the AMA noted. About 80% of nonprofit hospitals give back less to their communities than they receive in estimated tax breaks, with some short by hundreds of millions, according to a March report from the Lown Institute. 

Hospitals have broad flexibility in defining eligibility criteria for financial assistance, and physicians want more uniformity. 

“Failing to standardize the financial assistance process across all nonprofit hospitals makes the benefit inaccessible to many eligible people. A patient may qualify for aid at one hospital, but not at a hospital across town,” AMA President Bruce A. Scott, MD, said in a Nov. 11 announcement. “Often the application process is not clear and requires patients to complete onerous paperwork requests, discouraging patients from completing financial aid applications. In some cases, patients are not screened for eligibility to ensure financial assistance reaches those in need.”

After passing the new policy, AMA said it will advocate for the development of minimum eligibility standards for nonprofit hospital financial assistance. The association also wants to require screening of patients for charity care eligibility and a standardized definition of community benefits when evaluating hospitals. 

AMA said it also discussed possible increased enforcement for nonprofits that provide “little or no community benefit.” Scott and colleagues plan to advocate for expanded government oversight, enforcement of state and federal guidelines, and the ability to enact penalties and revoke a hospital’s nonprofit status. 

For its part, the American Hospital Association has defended its members’ tax-exempt status. In September, AHA highlighted a report prepared by Ernst & Young, which claimed the estimated tax revenue forgone due to tax-exempt hospitals was about $13.2 billion in 2020. Meanwhile, the benefit the same institutions provided was about $129 billion or 10 times greater.

AHA also published a blog post in March criticizing the Lown Institute report cited by the American Medical Association. 

“Despite all the available evidence showing hospitals’ devotion to their communities, the latest iteration of the Lown Institute’s so-called ‘Fair Share’ report on hospital community benefits suffers from the same biases, flaws and shortcomings as its previous reports,” AHA CEO Rick Pollack wrote earlier this year. 

Radiologists and researchers also have criticized hospitals’ murky use of nonprofit status in recent months. An October report from the Houston Chronicle noted that Texas Children’s leadership pay grew 125% in the years leading up to layoffs. Ge Bai, PhD, CPA—a professor of health policy and management at Johns Hopkins, who has authored multiple radiology-related research studies—commented for the report. 

“The line separating a nonprofit and for-profit is getting murkier and murkier, if you compare behavior,” Bai told the newspaper. 

As one example, she cited large bonus and incentive payments, traditionally awarded at for-profit companies, which are becoming increasingly common at hospital nonprofits. However, these are still relatively rare in other nonprofit businesses. 

“You can look around the nonprofit sector,” Bai added. “You really don’t see the high-powered incentives being used so brazenly.”

Tarang Patel, MD, an Arizona-based radiologist and podcaster, responded to Bai on social media, noting that physicians at these nonprofits do not receive the same perks. 

“Executives at many nonprofit health systems have different retirement plans, and tax referral options than even their highest paid physician employees and definitely other employees,” Patel wrote Oct. 22 on X.com. “Why? To put away $$ millions in bonuses?”

“Where is the Fair Market Value for nonprofit health systems? It only applies to their physicians to control their salaries but NOT the executives/admin!” he added in a separate post.