New Report Claims Cleveland Clinic Falls Short On Charity Care Dollars

The Cleveland Clinic found itself at the bottom of the list in a report from a nonpartisan healthcare think tank that tries to measure how much community benefit hospitals give to their local communities.

According to a new report from the Lown Institute, the clinic spent the least on charity care and community investment than any other U.S. hospital compared to tax breaks received from the federal government. University Hospitals also received a poor grade from the national think-tank organizations that looked at records of hundreds of hospitals across the country to determine the rankings.

Researchers at the Institute compared community investment to estimated funds the hospital receives in tax breaks and determined the Cleveland Clinic has a fair share deficit of about $260 million.

Cleveland Clinic officials disagree with the report's findings and question how the organization calculates community benefit and investment.

Ideastream Public Media host Tony Ganzer spoke with health reporter Lisa Ryan about there port and reaction from local hospital officials.

The report looked at hospitals' community benefit. What does that actually mean?

The Internal Revenue Service (IRS) has specific requirements for nonprofit hospitals, like Cleveland Clinic, University Hospitals and others, to be tax-exempt. They are called the community benefit standards, and the IRS uses these standards to make sure a hospital is operating for the primary purpose of promoting health.

Hospitals have to provide care for all patients and have an open emergency room, regardless of a patient’s ability to pay. If a hospital restricted access to health care based on making sure the hospital makes money, that’s obviously not a community benefit. Hospitals must have to have a board of directors with community members on the board, as a way to keep hospitals accountable to the community.

They also have to use their surplus funds to improve the facilities and patient care, as well as using the extra money to advance medical training and research.

So why did Cleveland Clinic score so poorly on providing community benefit according to the Lown Institute? 

Hospitals are tax-exempt, but the Lown Institute calculated how much each hospital would have had to pay if they weren’t tax-exempt.

According to the Lown Institute, the hospitals were ranked based on charity care spending, spending on other community health initiatives, and the proportion of patient revenue from Medicaid (a measure of the hospital’s commitment to taking care of low-income patients). Data sources were hospital tax filings and cost reports from the Centers for Medicare and Medicaid from 2018.

The institute measured the Clinic’s tax break at about $341 million, or about 6 percent of the hospital’s expenses, and it measured charity care and community investment spending at about $80 million, which creates a deficit of about $260 million.

“We actually didn’t count research dollars as community benefit, even though the IRS allows that,” said Dr. Vikas Saini, president of the Lown Institute.

So Saini is saying that although the IRS allows hospitals to count doctor training and research in community benefit spending, the Lown Institute believes this actually benefits the hospital, and is something that hospitals would be doing anyway.

But the Cleveland Clinic has an issue with the way the Lown Institute calculated the community benefit deficit?

Yes, clinic officials said education and research is very important to the community, and that COVID-19 research is a relevant example of this.

“Health care could not advance if organizations like the Clinic weren’t making investments in research,” said Steve Glass, the Cleveland Clinic’s chief financial officer. “We wouldn’t be able to deal with this pandemic without organizations like the Cleveland Clinic, over the last 18 months, investing heavily around COVID research. I don’t know how you could argue that COVID research doesn’t have an impact on the communities we serve.”

Glass also said he hasn’t seen the full report and how exactly the Lown Institute calculated the deficit. He believes research and education is important to the community.

How did other Northeast Ohio hospitals fare in the Lown Institute report?

The report found Mercy Allen Hospital in Oberlin invested nearly as much as they would have received in tax breaks. And Medina Hospital was also near the top, with a smaller deficit than some of the other hospitals in the region.

And while Cleveland Clinic is listed as one of the worst in the country, with a deficit of about $260 million, University Hospitals didn’t score much better. The Lown Institute says their fair share deficit is about $60 million.

UH officials said their total community benefit expenditures were not reflected in the Lown Institute report. A spokesperson for U-H said in 2019, their community benefit expenditures were more than $400 million.

As far as the national rankings: There are some major hospitals at the bottom, with bad fair share deficits, including Cedars-Sinai Medical Center and the University of Michigan.

The hospitals that scored the best in terms of community investment are Paradise Valley Hospital in California and Elmhurst Hospital Center in New York. The Lown Institute said a lot of New York public hospitals scored well because of how they provide health care regardless of a person’s ability to pay.