Prognosis: Profits

Tax breaks save nonprofits millions

Dec.10, 2010. Boston, MA.
Staff photos at Community Catalyst.
© 2010 Marilyn Humphries
Dec.10, 2010. Boston, MA. Staff photos at Community Catalyst. © 2010 Marilyn Humphries © 2010 Marilyn Humphries

All but eight of North Carolina’s general hospitals are nonprofits.

That means they pay no state or federal income taxes and no real estate taxes on hospital-related properties.

They also get a full rebate from the state for all sales taxes they have paid.

Collectively, those tax breaks save them hundreds of millions of dollars each year.

Contrary to what the name suggests, most nonprofit hospitals bring in more money than they spend. They’re required to put the extra money back into their operations.

In exchange for their tax exemptions, nonprofit hospitals are expected to provide benefits to the communities they serve.

“There’s a high expectation that nonprofits belong to the public,” says Jessica Curtis, who heads Community Catalyst’s Hospital Accountability Project in Boston.

Federal rules don’t spell out precisely what benefits hospitals must provide.

Some states do provide guidelines, but North Carolina does not.

Most nonprofit hospitals – as well as for-profit hospitals – provide charity care to patients who are poor or uninsured.

Both kinds of hospitals also lose money treating Medicaid patients and uninsured patients who don’t pay their bills.

They typically make up for those losses by marking up charges for patients with private health insurance.

Some nonprofit hospitals, such as Carolinas HealthCare System, are also government entities that can issue tax-exempt bonds, a power that allows them to borrow money at low rates.

These public hospitals also have the power of eminent domain, which means they can demand that property owners sell at a fair market value to make room for hospital projects. CHS officials say they’ve never used that power.

For-profit hospitals do pay taxes. They’re expected to generate profits and to return much of that money to shareholders.

Charlotte Observer staff writer Karen Garloch contributed.

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