Hospital Community Benefits and Health Care Reform in Maryland

There is a growing public debate in the United States about holding corporations and businesses accountable for publicly provided tax breaks and tax incentives intended to stimulate broad economic benefits. In Baltimore, much of this debate has focused on tax incentives provided to private developers of large real estate projects. Driven in part by concerns over Baltimore’s shrinking tax base, these debates raise legitimate concerns over the benefits our city receives in exchange for the favorable tax treatment it gives certain corporations.

Largely overlooked in these discussions is the tax-exempt status enjoyed by Baltimore’s – and the nation’s – large nonprofit hospital sector. While hospitals clearly provide important services to the communities where they are located and, in many cases, serve as anchors in those communities, their nonprofit status confers significant financial benefits in the form of state and federal tax exemptions. In exchange, nonprofit hospitals are required to provide health benefits to their local communities and to account for these “community benefits” annually.

This report, written by Anna Davis of Advocates for Children and Youth (ACY), explores the background of the community benefit requirement and its potential to increase access to health care and improve health outcomes in Baltimore, a city burdened with enormous health disparities based on demographic and other factors. Release of the report comes amid efforts by Congress to repeal and replace the Affordable Care Act (ACA), which established new accountability measures for hospitals. These measures provide a framework to ensure that the billions of dollars hospitals receive in tax subsidies are reinvested to meet the significant social and economic needs of communities.

This exploration is also timely in Maryland in particular, where, for the last few years, the state has been engaged in a ground-breaking effort to shift financial incentives for hospital services from a fee-for-service model – in which hospitals were reimbursed based on the number of services they provided to patients – to a “global budget” model, in which hospitals receive a fixed annual budget based on the numbers of patients they served in the past. This new payment model is intended to give hospitals a financial incentive to reduce unnecessary services, ideally, by improving the health of people living in the surrounding community. With the transition to this new model, the financial health of Maryland hospitals will have to align more closely with the health of the communities they serve, creating a unique opportunity for hospitals to invest in efforts that have the potential to truly impact community health.