The Internal Revenue Service (IRS) has issued a report on community benefit and executive compensation practices and reporting for not-for-profit hospitals. The report results from a study that began in 2006 and is based on responses to questionnaires sent to 500 not-for-profit hospitals.
The IRS found that the average and median percentages of total revenue reported as spent on community benefit were 9 percent and 6 percent, respectively. These percentages were lowest for rural hospitals and highest for hospitals located in the 26 largest urban areas. Uncompensated care was the largest reported community benefit expenditure, accounting for 56 percent the of aggregate community benefit expenditures reported. Uncompensated care and community benefit expenditures were concentrated in certain hospitals and unevenly distributed. Fourteen percent of the hospitals, for example, reported 63 percent of the aggregate uncompensated care expenditures, while one group of 15 hospitals represented 93 percent of all medical research expenditures reported.
The report’s findings on executive compensation showed average and median compensation for the top management official as $490,000 and $377,000, respectively. Both the average and median total compensation paid increased with revenue size. Twenty hospitals were selected for examination based on high compensation amounts paid: in this group, the average and median total compensation were $1.4 million and $1.3 million, respectively. The report concluded, however, that nearly all examined compensation amounts were upheld as established pursuant to the rebuttable presumption process allowed by the IRS and within the range of reasonable compensation.
Read the report’s executive summary.
