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Tax breaks save nonprofit hospitals millions

Exemptions tied to an expectation of offering communities benefits

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All but eight of North Carolina’s more than 100 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 rebates from the state to compensate them for all sales taxes they’ve 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. But 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.

Virtually all hospitals, nonprofit and for-profit, provide charity care to the poor and uninsured. Both kinds of hospitals also lose money treating Medicaid patients and those who don’t pay their bills. They usually make up for those losses by marking up charges for patients with private health insurance.

Through tax-exempt bonds, many nonprofit hospitals can also borrow money at low rates.

As a public hospital authority, Carolinas HealthCare also has the power of eminent domain, which means it can demand that property owners sell at a fair market value to make room for hospital projects. Hospital 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.

Staff Writer Karen Garloch contributed.

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