Becker's Hospital Review

8 CFO / FINANCE Intermountain CEO: Nonprofit hospitals must clarify their value amid tax-exempt scrutiny By Alan Condon A s nonprofit hospitals and health systems face mounting scrutiny over their tax-exempt status, Intermountain Health President and CEO Rob Allen says it's time to better define — and communicate — what nonprofit organizations deliver to communities. Amid recent changes in CMS and Joint Commission guidance on social needs screening, along with increasing federal and state attention on nonprofit health systems, Salt Lake City-based Intermountain is enhancing transparency and reaffirming its mission to drive health equity and long-term community investment. "is is a topic that has been getting more attention across the country. It's an important one — how do we, as nonprofit health systems, handle the responsibility we have? Are we meeting our obligations?" Mr. Allen told Becker's. "From a transparency perspective, we want to make sure we're getting information out to the broader community." e heart of the issue lies in the conflicting priorities between for- profit and nonprofit hospitals. "A for-profit system has a primary responsibility to shareholders, while a nonprofit's primary responsibility is to the community," he said. "One aspect oen debated is the tax-exempt status. I think there's a misperception — that nonprofits don't pay taxes. We do. But the crux of the issue is that, in exchange for some tax breaks, nonprofits commit to giving back to the community at least the value of those breaks through community benefit." In 2023, Intermountain paid $469 million in taxes. at included payroll taxes, marketplace fees, certain property taxes and taxes on income from unrelated business activities — those that aren't part of its core health mission. Had Intermountain operated as a for-profit entity, it would have paid $362 million more in taxes, according to Mr. Allen. Instead, the health system contributed $746 million in community benefit. "So we gave back more than twice the amount of the tax benefit," Mr. Allen said. "In addition, we invested another $567 million into health services and initiatives that aren't included in that calculation." Total community benefit in 2023 exceeded $1.3 billion. However, with nearly 40% of hospitals operating at a loss, many nonprofit hospitals — particularly those in rural areas or with a high Medicaid payer mix — are challenged with how to sustain certain services. "at's a critical consideration," Mr. Allen said. "e nonprofit model carries with it a hope and a promise. e hope is that we'll be here when the community needs care, and the promise is that when someone seeks access, they'll be able to get it." Intermountain reported an operating income of $137 million (0.9% margin) in 2023, up slightly from $121 million (0.9%) the previous year, but it is aiming to achieve a sustainable 3% to 6% margin to maintain and expand services. "In 2023, we operated at just 0.9% — below what's needed long term," Mr. Allen said. By comparison, Nashville, Tenn.-based HCA Healthcare, the largest for-profit system in the country, reported an operating income of $7.7 billion (11.8% margin) in 2023, compared to an $8.6 billion operating gain (14.2% margin) in 2022. Mr. Allen said for-profit systems oen focus on high-margin services, while nonprofits invest in upstream interventions. "It's a different model," he said. "eir success oen depends on treating illness; ours focuses on preventing it — and that changes how and where we invest." A Yale School of Medicine study published in February supports that view. It found that over the past 20 years, 92 large U.S. healthcare companies — including some for-profit hospitals and health systems — spent 95% of net income on shareholder payouts — totaling $2.6 trillion. "at's consistent with a for-profit business model," Mr. Allen said. "But at Intermountain, every dollar above our operating costs is reinvested into the community. at's how we supported $1.3 billion in community benefit in 2023 — through the resources we generated and redirected locally." Clarifying these distinctions is critical, he said, as the debate over nonprofit hospitals' role continues. Adding to the debate is the argument that many of the benefits nonprofit hospitals provide to their communities extend beyond what is reported on tax forms. A May study published in Health Affairs Scholar found that a significant portion of the value these hospitals provide is not reflected in IRS Form 990 Schedule H — the current tool used to quantify community benefit. Researchers warn that overlooking these contributions could have implications for how these health systems are treated under tax law. "Some argue nonprofits should do everything, while others want to strip away nonprofit status entirely," Mr. Allen said. "But our mission is clear: to deliver excellent care, now and into the future, and that requires constant balance. We must remain financially sound — not to generate excess — but to keep reinvesting where it's needed most." Among Intermountain's key investments are community health needs assessments — now a requirement for nonprofit health systems. Suicide prevention, in particular, has been a major focus across the health system. e system is also prioritizing simplification and proactive care. "We have to simplify the experience for people — not just in one episode of care, but throughout their entire health journey. People need a clear access point, someone who helps them navigate the system," he said. "Too oen, patients are told to find a lab, schedule their own imaging, or manage referrals — and the burden falls back on them. We're putting a lot of energy into changing that." Simplification, he said, also supports health equity. For underserved populations, simplifying the system can improve access. e second priority — proactive care — involves a shi from reactive, episodic care to value-based models that promote wellness. In

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