Article 1 (Herring et al., 2018).

Policymakers have been interested in evaluating the value that nonprofit healthcare organizations with a tax-exempt status provide. This article employs data from various government bodies from 2012 to assess the value of tax-exempt hospitals to the community. In the U.S., about 60% of all hospitals are nonprofit having been exempted from tax by the Internal Revenue Service. The expectation is that these hospitals provide sufficient community health benefits to rationalize their tax-exempt position. Over the years, policymakers have been in arms over this standard not being met, with several lawsuits over negligible community benefits arising. Nevertheless, there is not enough comparison of the tax exemption value to community benefits for hospitals sampled nationally. This study used data from the IRS, Medicaid and Medicare services, the American Hospital Association yearly survey and Hospital Cost Reports to gauge community benefits. These benefits are then compared to tax exemption and characteristics of hospitals that fall short of benefits beyond their tax-exempt status are then identified.

Community benefits are classified into 8 categories according to the IRS. These include: charity care, Medicaid unreimbursed costs, other programs unreimbursed costs, community health improvement programs, subsidized health programs, unreimbursed health provider education, unfunded research and cash and similar donations to other healthcare organizations. After analysis, the data showed that there exists a broad disparity in community benefits across hospitals, wide disparity in the tax-exemption value and disparity between the two sums. The final analysis involved evaluating the degree to which the disparity across healthcare organizations can be explained using either market or hospital characteristics. Market characteristics include malpractice environment, hospital market and insurance concentration, rural vs urban, percent uninsured and percent in poverty. Hospital characteristics include system ownership, percent Medicaid and Medicare patients, church affiliation, bed size, presence of trauma facilities and obstetrics services and teaching status.

The mean benefits of tax exemption after analysis equaled approximately 5.9% of total expenditure. For comparison between nonprofit and profit, based on the gradual community benefits, the mean tax-exemption value is a bit higher in comparison to the mean value for community benefits. There is significant variation for nonprofits with approximately 62% of them having greater community benefits in comparison to tax benefits. Only 20% of nonprofits surpassed their tax-exemption value when only charity care is considered. This analysis proves that community benefits and the tax exemption value significantly vary across nonprofit healthcare organizations. Additionally, the relation between community benefits and tax-exemption value is strongly linked but only a few healthcare organizations or market features explain the disparity. So far, it appears despite benefiting from a tax-exempt status, that many nonprofit hospitals barely reciprocate in significant community benefits.

Article 2 (Suarez et al., 2011)

The status of public health infrastructure governs local public health agencies’ (LPHA) ability to offer essential services and respond to healthcare emergencies. This article reviews data concerning the manner in which hospitals can employ financial indicators in promoting organizational sustenance, analyzing financial risk and improving organizational volume.

With new threats to public health increasing, the challenge our public health infrastructure faces is addressing said threats in an environment of decreasing budgets and strong public scrutiny. LPHAs in the U.S. involve a workforce, organizational, financial and information systems. Uniform financial data helps analyze of expenditure and revenue trends and facilitate the alignment of finances with community health outcomes. Public health, without a working framework for financial research and analysis is incapable of conducting analysis and subsequently providing transparent financial accountability. According to prior research in public health, 5 proposes practices to achieve financial transparency include infrastructure for digital data reporting, standard classifications for revenue and expenditure, extensive finance results reporting, professional workforce associations and uniform financial analysis practices (Honoré et al., 2007). Unless they are financially feasible, LPHAs are unable to meet their objectives. Financial indicators can act as an organizational capacity improvement tool.

Financial indicators, often expressed as ratios can be effective strategic management device to provide stakeholders with systemic and concise methods to organize the massive amounts of data contained in financial statements. Financial rations can help decision-makers recognize financial weaknesses and strengths and take the necessary measures towards reaching the organization’s goals. With respect to public health, the benefits of using financial ratio analysis include peer agencies benchmarking, consolidation of expenditures with objectives, performance and quality improvement, development of financial standards of operation and accreditation standards and minimizing political scrutiny. LPHAs effectiveness in providing their services to the public while simultaneously achieving the preferred public health outcomes relies on their capacity to effectively utilize scarce resources. Keeping track of financial performance and forecasting financial risk using financial ratio assessments have proven helpful for hospitals and other LPHAs in recusing costs, increasing profits.

Some recommendations for LPHAs on employing financial ratios include promoting the use of uniform data formats to enable ration assessments, evaluating financial indicators with respect to their importance to LPHAs, evaluating and testing the efficacy of financial rations via research, disseminating the results of financial analysis across relevant public health organizations and conducting training in financial ratios to LPHAs staff. The application of financial ratios is a feasible measure in assisting LPHAs with their responsibilities to establish financial management measures that result in increased organizational function. Since the aim of public health is to have people live healthier and longer, financial administrators of healthcare organizations should not underestimate the value of organizational capacity.

References

Herring, B., Gaskin, D., Zare, H., & Anderson, G. (2018). Comparing the Value of Nonprofit Hospitals’ Tax Exemption to Their Community Benefits. INQUIRY: The Journal Of Health Care Organization, Provision, And Financing, 55, 004695801775197. https://doi.org/10.1177/0046958017751970

Honoré, P., Clarke, R., Mead, D., & Menditto, S. (2007). Creating Financial Transparency in Public Health. Journal Of Public Health Management And Practice, 13(2), 121-129. https://doi.org/10.1097/00124784-200703000-00007

Suarez, V., Lesneski, C., & Denison, D. (2011). Making the Case for Using Financial Indicators in Local Public Health Agencies. American Journal Of Public Health, 101(3), 419-425. https://doi.org/10.2105/ajph.2010.194555