Community Benefit in California Hospitals: A Landscape Review

Nonprofit hospitals in California are exempt from paying federal and state taxes if they meet cer­tain standards defined by the Internal Revenue Service, Affordable Care Act, and state law. These standards include an obligation to finance a set of community-focused, charitable activities known as “community benefit.”

This report provides a landscape review of community benefit scope and practice in California nonprofit hospitals. It is based on a review of the national literature, California community benefit regulations and legislation, community health needs assessments and community benefit plans submitted by California nonprofit hospitals, available financial data on community benefit spending, and interviews with 49 stakeholders.

Key findings include these:

• What are the most common community health priorities identified by California’s nonprofit hospitals? More than nine in 10 nonprofit hospitals (92%) list access to care as a community benefit health priority. Mental health / behavioral health is also a common priority, chosen by 84% of hospitals.
• How much do California nonprofit hospitals spend on community benefit? US hospitals reported over $93 billion in community benefit spending in 2020, of which $8.7 billion was attributed to hospitals in California.
• What is the value of the taxes not collected from California’s nonprofit hospitals? Empirical estimates are not publicly available, but experts have estimated it at $2.6–$2.8 billion in 2020. However, previous studies indicate it could be much higher.
• What are the common themes in the academic literature about the impact of community benefit spending across the country? A number of scholars have concluded that the impact of community benefit spending is not commensurate to the value of the tax benefit.
• What did California stakeholders say about the impact of community benefit spending in the state? Interviewees who participated in this study were starkly divided in their assessments of com­munity benefit’s impact on community health in California. Interviewees within the hospital industry took great pride in their community benefit programs, while most nonhospital industry interviewees expressed significant concerns.