North Carolina Nonprofit Hospitals Fail in Providing Charity Care Despite Tax Breaks

The State Health Plan and Johns Hopkins Bloomberg School of Public Health find troubling disparities in hospitals’ commitment to the most vulnerable members of their communities

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An analysis by Johns Hopkins Bloomberg School of Public Health and the North Carolina State Health Plan revealed that the majority of North Carolina nonprofit hospitals are not fully honoring their charitable mission. Although nonprofit hospitals reap lucrative tax breaks in exchange for serving the poor, their charity care spending varies wildly and with little accountability. 

State Treasurer Dale R. Folwell, CPA, invited researchers from Johns Hopkins Bloomberg School of Public Health to extend their national study of hospitals’ charity care spending to North Carolina. Together with the North Carolina State Health Plan, these researchers found troubling disparities in North Carolina hospitals’ charity care spending.  

Fewer than 25 hospitals exceeded the value of their tax exemption with the amount of their charity care spending in North Carolina. Our analysis suggests that North Carolina’s largest nonprofit hospital systems reaped tax breaks worth more than an estimated $1.8 billion in 2019-2020. Across the majority of these systems, charity care spending did not exceed 60% of the value of their tax breaks.

Hover over the dots on the map below to show details. Page 1 includes an interactive map, and page 2 includes an interactive comparison chart.

Key findings from the study include: 

• North Carolina’s largest hospital systems benefited from federal, state and local tax exemptions worth more than an estimated $1.8 billion in 2020. 
• The majority of those large systems’ charity care failed to exceed 60% of the worth of their tax exemptions.  
  • Multiple systems inflated their community benefits by claiming controversial “underpayments” from government programs.  
• There are huge disparities in charity care spending across hospitals. 
  • Even for-profit hospitals operating in the red have provided higher levels of charity care than some profitable nonprofit hospitals in the state.  
  • Some nonprofits dedicated less than 0.5% of their total expenses to charity care, despite enjoying tax breaks equal to an estimated 5.9% of total expenses. For 25 nonprofits, charity care accounted for less than 2% of expenses. 
• On average, North Carolina’s hospitals were three times more profitable than the national average operating profit margin in 2019.  
  • After nonpatient revenue like investments, North Carolina hospitals enjoyed a 10.91% average excess profit margin — triple the margins in agriculture, higher than Cable TV and almost equal to the margins of the alcoholic beverage industry.   
• The burden of charity care spending often falls hardest on those hospitals least able to bear it.  
  • In North Carolina, the two most generous hospitals in providing charity care lost money in 2019. 
  • Only four of the state’s 15 most profitable hospitals delivered enough charity care to exceed the value of their tax exemption. All of these hospitals enjoyed profit margins greater than 20%, with six hospitals surpassing 30% margins in 2019.  
• North Carolina has a crisis of accountability.  
  • No state official currently actively enforces charity care spending and tax exemptions. There is little active oversight and no enforcement. 
  • Other states require hospitals to equal the value of their tax exemption with charity care spending.