Do Nonprofit Hospitals Pay Their Way?

Using 1988 and 1991 data from nonprofit voluntary hospitals in California, we find that the vast majority of nonprofit hospitals provide community dividends in excess of the tax subsidies they receive. However, nearly 20 percent of nonprofit hospitals do not meet this standard. Further, those hospitals that do not meet the standard tend to not meet the standard over time. We recommend more explicit identification of the community dividends expected in return for special tax treatment and more explicit accounting on the part of nonprofit hospitals.