Fuzzy Math and Narrow Metrics: Unpacking the Flaws in the Lown

Hospital Analysis
Overlooking Billions in government underpayments, Lown Institute admits they “do not include”
more than $1.8 billion in unreimbursed care because it “does not represent a direct and
meaningful investment in community health.”

A recent "study" by the Lown Institute makes the sensational and false claim that nonprofit
hospitals fail to live up to their tax-exempt missions. However, the report's findings hinge on
outrageously narrow criteria that arbitrarily dismiss over $1.8 billion in unreimbursed care to
Minnesotans on public health plans like Medicaid.

The Lown analysis also paints a distorted picture detached from how nonprofit hospitals provide
irreplaceable public value by rejecting widely accepted community benefit categories like
medical training and clinical research. From overlooking how healthcare breakthroughs improve
patients' lives' to ignoring how an adequate caregiver workforce increases access everywhere,
the study's myopic approach represents a fundamental misunderstanding of the civic
obligations and societal impacts of nonprofit healthcare institutions across Minnesota.

• Cherry-picked categories ignore essential hospital contributions. The report overlooks

vital activities like researching life-saving treatments, training the next generation of
caregivers, and serving Medicaid patients despite significant underpayment. These
efforts align with IRS, Congressional and expert consensus on community benefit.
Hospitals also invest in developing tests, expanding treatment capacity, and launching
outreach campaigns to improve access.

• The methodology fails to capture the full scope of community benefits. Financial
assistance is just one aspect of hospitals' community investment. The report ignores
important programs addressing training, research and equity work related to those on
public assistance in need of housing, food access, education, wellness, and
transportation. Hospitals bear significant uncompensated and unreimbursed costs
related to improving the lives of Medicaid and Medicare patients, which "relieve
government burden," a cornerstone of tax exemption.

• Arbitrary "fair share" threshold based on flawed, outdated analysis. Lown's invented
spending standard relies on a questionable study using a 2012 cost report and IRS 990
data. Applying this outdated benchmark to 2021 data without acknowledging the impact
of changes in the healthcare landscape in the last 11 years, such as Medicaid expansion,
is misleading.

• Essential hospital services rely on subsidies to stay viable. Hospitals often fully or
partially subsidize critical but costly services like burn and neonatal units that may not be
available elsewhere. They maintain these offerings despite rising expenses from
 inflation, drugs, labor, supplies, and equipment. The report oversimplifies this by
suggesting that only a small subset of activities "count" as community benefits when
hospitals improve public health in numerous ways. These are separate and beyond the
costs associated with unreimbursed costs from government-sponsored programs such as
Medicaid and Medicare.

• Medical research benefits extend far beyond local communities. Critiquing research as
disconnected from local needs is shortsighted. Medical breakthroughs improve health
for everyone, regardless of where the research occurred. Nonprofits receive tax
exemptions not just for localized programs but for their overall missions benefiting
society, which training and research clearly do. The focus on dollars invested locally is
too narrow—the value hospitals provide goes far beyond financial figures.

In contrast to the Lown Institute's flawed and self-serving report, data from Minnesota's
hospitals and health systems shows the significant contributions they make to their
communities:

• Amid continued financial strains, Minnesota's hospitals and health systems

contributed nearly $3.4 billion in programs and services to benefit the health of their
communities in 2021. Much of what influences health happens outside of hospitals, in
schools, workplaces, and neighborhoods. Hospitals provide critical support and
proactive community health services to meet the unique needs of their communities.
Despite challenges like declining reimbursements, workforce shortages, and increasing
costs, hospitals remain committed to their missions of supporting their communities.

• Minnesota's hospitals and health systems are committed to providing high-quality care
to all Minnesotans regardless of the patients' ability to pay. In 2021, they provided
$655 million to cover care for uninsured or underinsured patients. Minnesota's
uninsured rate was 4.0% in 2021, leaving approximately 228,000 Minnesotans without
health insurance coverage. Hospitals routinely extend financial assistance to those in
need and offer a variety of payment options and services, including financial counselors.

• Minnesota hospitals and health systems give back to the community in a variety of
ways. By investing in solutions to mitigate social challenges to health, hospitals are
improving the future for the state of Minnesota and its communities. Some examples
include workforce programs and partnerships with colleges and universities, innovating
care delivery to address social determinants of health, and taking actionable steps to
combat health inequities and disparities.

• 2021 itemized community contributions include:

o Significant investments to cover the cost of care that Government
reimbursements do not. Medicare leaves a $1 billion gap statewide, and
Medicaid leaves an $837 million gap statewide.
 o $4.06 million in community building, such as health screenings, education, fairs,
immunization clinics, subsidized health services, and outreach programs.
o $197 million in education and workforce development, including training for
doctors, nurses, and other highly skilled health care professionals.
o $16 million in research to support the development of better medical treatments
and to find cures for diseases.

The Minnesota-based report reflects 2021 financial information – the most recent data available
– self-reported by Minnesota's hospitals and health systems and supplemented by the
Minnesota Department of Health. In contrast to the Lown report, it demonstrates the true
scope and impact of hospitals' community benefit contributions and underscores their role as
community pillars dedicated to serving their patients and improving the health of all
Minnesotans.

The bottom line is this: The Lown Institute doesn't provide care for anybody. The Lown
Institute's analysis of hospital spreadsheets cannot fully grasp the nuances of community needs
and benefits as experienced by those working directly in healthcare. A critical factor is the
substantial community benefit hospitals and health systems provide by treating patients on
Medicare and Medicaid, which reimburse far below the cost of care. Lown’s contention that any
public reimbursement shortfall for hospitals is merely an accounting convention is a
fundamental misunderstanding of the complexity of the U.S. healthcare system. The qualitative
differences between public and private payers have significant implications for hospitals, as
those who provide this needed health care attest.

Lown's purported advocacy of "socially responsible hospitals" fatally warps this analysis and
their flawed analysis of community benefit through the tax code shows just how unqualified
their grasp is of health care policy and tax obligations.