The gleaming towers of Cleveland Clinic and Mayo Clinic are a source of pride for the U.S. health care system, drawing international patients and world-class acclaim. But to many neighbors just next door, these tax-exempt hospitals and their peers are often the enemy, failing to reinvest in the community and putting hospital margins well ahead of their mission. That tension drove a year-long probe by POLITICO’s Dan Diamond on how hospitals win tax-exempt status, how the industry has worked to protect it and how the loose regulations have skewed hospitals’ priorities.
As Diamond’s reporting showed, the nation’s most prominent tax-exempt hospitals have seen their profits rise sharply since the Affordable Care Act took effect. Meanwhile, they’ve quietly cut back on free care and held other community investments flat, despite the explicit requirement to serve these communities. POLITICO’s series put a national spotlight on how “community benefit” can be co-opted by big hospitals like Cleveland Clinic – which touted community benefits such as an organic farmers’ market or executive speeches – while its actual neighbors suffered historically bad health outcomes, with little recourse to the clinic.
The reporting illustrated how Mayo Clinic, while reaping hundreds of millions of dollars in annual profits, was moving to close rural hospitals in its network, thereby forcing expectant mothers to drive 23 more miles to deliver their babies. These issues are especially troubling because the U.S. tax code regards these hospitals as charitable institutions; in exchange for tax-exempt status, they are asked to provide a public benefit. But, as Diamond’s reporting showed, most big hospitals frequently cite the differential between their sticker price and Medicaid reimbursement rates as their top community giveback. Meanwhile, local officials struggle with the fact that the hospitals – often the largest employers in their hometowns – don’t pay state or local taxes, either. In cases such as that of Mayo Clinic, the hospital’s political clout exceeds that of its host community; Diamond explored how the Minnesota legislature gave the clinic $585 million to upgrade the surrounding infrastructure to attract more national and international patients, even as the clinic continued with plans to close rural hospitals.
Those plans are now on hold, perhaps thanks partly to Diamond’s story. And members of Congress, led by Iowa Sen. Chuck Grassley, are talking about putting more teeth into the requirement that tax-exempt hospitals provide community benefits. Yet when the GOP pushed its landmark tax reform, that provision was nowhere to be seen – as Diamond exclusively reported. Rich in reported detail, comprehensive in financial analysis, Diamond’s stories shed light on a hidden corner of the health-care debate – but one into which billions of dollars in profits disappear every year. POLITICO’s stories showed how the federal government and local communities could pressure the nation’s top hospitals to do more, activating hundreds of millions of dollars per year for free care, access to care in rural areas and local clinics that could improve health outcomes for thousands of neighbors.