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Oversight Subcommittee Chairman Schweikert – Hearing on Tax-Exempt Hospitals and the Community Benefit Standard

April 26, 2023

As prepared for delivery.

“Ranking Member Pascrell and Subcommittee Members— I look forward to working with you this Congress.

“I would like to welcome everyone to today’s Oversight Subcommittee hearing. This is our first Oversight Subcommittee hearing this Congress and I am very happy that for our first hearing we were able to work with Ranking Member Pascrell and his team in putting this hearing together. Our approach today is not intended to be partisan. This is a fact gathering hearing to allow Members of the Committee to hear from experts about what is happening in the real world.

“Today’s focus is on Tax-Exempt Hospitals and the Community Benefit Standard. Hospitals must meet certain requirements to obtain and maintain tax-exempt status, including organizational and operational requirements; community benefits; and Patient Protection and Affordable Care Act (ACA) requirements. When it comes to community benefits, various academics and think tanks have sought to put a value on both the tax-exemption hospitals receive and the value of the community benefits they provide.

“We know that these tax exemptions are incredibly valuable. One of our witnesses today from KFF will talk about their work showing that the tax exemptions were valued at about $28 billion in 2020, with half of that amount coming from the federal tax exemption. KFF has also found that the value of charity care provided by hospitals varies substantially across facilities ranging from 0.1 percent of operating expenses for a hospital to 7 percent or more for other hospitals.

“Additionally, some, like the Lown institute, have made efforts to calculate “fair share” spending for nonprofit hospitals by comparing each system’s spending on financial assistance and community investment to the estimated value of its tax exemption. The Institute’s results show significant deficits in community benefits provided as compared to the value of some hospitals’ tax exemption.

“Moreover, some articles and studies, including one co-authored by one of our other witnesses, argues that for-profit hospitals may be providing, on average, more charity care than some nonprofit, tax-exempt hospitals.

“Conversely, groups like the American Hospital Association (AHA) have published analyses arguing that the value of community benefits provided by hospitals massively exceeds the value of hospitals’ tax exemption. We welcome another one of today’s witnesses from the AHA to discuss these findings.

“The wide variation here seems to come from the lack of clear guidelines from Congress and the IRS about what constitutes a community benefit. We are also pleased to have a witness here today from the U.S. Government Accountability Office (GAO) who will talk about GAO’s 2020 report that discusses the nature of the standard and IRS’s inability to conduct effective oversight of the tax-exempt hospital sector.

“All of this makes exploring the issue of tax-exempt hospitals and the level of community benefits they provide worthwhile, and I thank the witnesses for being on today’s panel to help us shed light on this issue.

“I want to thank all our witnesses for being here today. Now I will turn it over to Ranking Member Pascrell for an opening statement.”