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Chairman Smith Opening Statement: Hearing on on Tax-Exempt Hospitals and the Community Benefit Standard

April 26, 2023

As prepared for delivery.

“Thank you, Chairman Schweikert and Ranking Member Pascrell.


“Today the Oversight Subcommittee is meeting to examine the tax-exempt status of nonprofit hospitals to ensure they are operating in the best interests of patients, communities, and taxpayers. As the committee with oversight jurisdiction over the IRS, the tax code, tax administration, and health care, we know this is an issue that is of great importance to Americans’ health.


“That’s not only because of the obvious essential role that hospitals play in our health care system but also because of their particular importance to many communities across this country where they are often the only option for medical treatment. That’s particularly true in rural areas that many of us here represent.


“Nonprofit hospitals account for almost 60 percent of hospitals in the United States. The federal tax-exempt status granted to most of these hospitals is significant. It is estimated to be worth $14 billion, with nearly another $14 billion coming from state and local tax exemptions.


“Recent studies and articles have raised concerns, however, that the level of community benefit, which includes charity care, provided by tax-exempt hospitals has been inadequate compared to the value of their tax exemption. Additionally, numerous news reports highlight aggressive billing practices, executive compensation in the millions of dollars, and abuses in the 340B program. The level of executive compensation is particularly alarming. The top 10 nonprofit hospital CEOs average more than $7 million annually, some as high as $14 million. This further questions whether these facilities are living up to their mission statements.


“In the best-case scenario, tax-exempt hospitals provide meaningful community benefits that exceed the value of their tax exemptions. And some do. But given the concerns that exist, an examination is needed to determine if sufficient community benefits, including charity care, are being provided and to ensure vulnerable patients and communities are being protected.


“This hearing is an opportunity for us to learn from expert witnesses and identify any issues that may need to be addressed through legislation so that we can be confident that nonprofit hospitals are meeting their responsibilities and have the resources they need. Additionally, we must be sure that the laws, rules, and regulations under which they operate are clear and effective.


“I am confident that together, we will identify the problems and the potential improvements that will benefit patients and communities with the flexibility they need.


“Thank you.”