Has the Affordable Care Act reduced the differentiated value of services provided by Not For Profit hospitals that special tax exemptions will be eliminated? Therefore, the existence of Not For Profit hospitals will disappear and all hospitals will be considered For Profit. To appreciate how this is a real possibility, it is important to understand the purpose of a Not For Profit hospital. The purpose of a Not For Profit hospital is to serve families in the community that cannot afford medical care. In exchange for this charity care, Not For Profit hospitals receive exemption from federal and state corporate income taxes, exemption from state and local property taxes, and access to tax-exempt bond financing. In addition, charitable contributions to Not For Profit hospitals are tax deductible for the donor. This allowed Not For Profit hospitals to live up to their mission of serving the community and being financially viable.
Now that the Affordable Care Act will provide insurance coverage for those individuals that were originally charity care, the argument of Not For Profit hospital special tax exempt status is significantly weakened. As Not For Profit hospitals start receiving payments for services originally written off as charity, the For Profit hospitals will have a stronger argument that they are being financially disadvantaged. In addition, when the Federal and State governments realize higher costs for the delivery of healthcare under the Affordable Care Act, they will also be looking for additional sources of income. This will create the argument that Not For Profit should not be treated any differently than For Profit hospitals. Between the push from For Profit hospitals and the government looking to generate additional income to help cover healthcare costs, Not For Profit hospitals existence will cease in the future. Forward thinking Not For Profit hospitals need to anticipate the elimination of the tax advantages in the future and be prepared to take on the same financial burden and benefits of For Profit hospitals.