UPMC disputes report challenging its community benefits

Health care giant UPMC is disputing a report from a health care think tank that gives it low marks on what it spends on charity care and community investment compared to the tax exemptions it receives.

The report from the Massachusetts-based Lown Institute says Pittsburgh-based UPMC is the 5th worst in the nation when the two metrics are stacked.

UPMC is classified as a nonprofit, so it doesn’t have the same taxes as corporations. This includes UPMC avoiding paying property taxes to municipalities and school districts. UPMC operates several hospitals and facilities across Pennsylvania, Western New York and Western Maryland. It is one of the largest employers in Pennsylvania.

The report in question analyzed information from more than 1,800 hospitals across 275 nonprofit hospital systems. It calculated that UPMC had what it called a fair-share deficit of $601 million. This means that UPMC spent about $600 million less on charity care and community investment than the value of its tax exemptions.

“Would half a billion in taxpayer dollars be better spent by directly funding addiction, food insecurity, or homelessness efforts?” said Dr. Vikas Saini, president of the Lown Institute, in a news release. “We should all be asking those types of questions given the vastness of these sums and the significant public health crises many communities are facing.”

UPMC ranked behind Seattle-based Providence Saint Joseph Health, Trinity Health in Michigan, Boston-based Mass General Brigham and the Cleveland Clinic Health System, according to Lown Institute.

UPMC spokesperson Susan Manko refuted the Lown report and said the hospital system provides a disproportionate amount of community benefits compared to other academic medical centers across the country.

Officials from UPMC have highlighted $1.7 billion in IRS-guided community benefits for the 2020 fiscal year, including investments in affordable housing, contributions to a new homeless shelter for Downtown Pittsburgh, a workforce development program, and medical research

Manko also questioned the methodology of the Lown report, noting the report excludes Medicaid shortfall, health professions education, and research. She said UPMC agrees with the health care trade industry group the American Hospital Association, which criticized the report recently.

In an April 12 blog post, AHA President and CEO Rick Pollack said the Lown report is “an obvious example of relying on preconceived notions and faulty methodology to draw inaccurate conclusions.”

AHA said hospital systems absorb underpayments from government programs such as Medicaid which Lown didn’t take into account, and said combined underpayments in 2020 were over $100 billion. A 2021 report from the AHA said tax-exempt hospitals provided more than $105 billion in total benefits to their communities in 2018 alone.

Pollack also said the Lown report does not include all the services hospitals provide to their communities, such as programs that address housing needs, accessing nutritious food, educational and wellness programs, health screenings, transportation for patients, and other programs and services.

Saini, the Lown Institute president, said the report does account for the aforementioned community services, but that large nonprofit hospital systems “still come up billions short of equaling the tax breaks the public gives them.” He called the AHA’s assessment of the Lown report disappointing and flawed.

“So while it’s important to recognize the great work so many hospitals are doing, the facts show that there’s a lot more that could be done, about $18 billion more, according to our data,” said Saini.

Saini also said there is precedent for excluding research, training and Medicaid shortfall from reports on hospital community benefits, as the state of Massachusetts does this when reporting on hospital systems.

UPMC said in February that it posted $24 billion in operating revenue in 2021, up $1 billion, or about 4.3%, from the year before. Additionally, the Lown Institute noted that UPMC accepted $761 million in covid-relief funds as it posted more than $1 billion in surplus revenues.

The health care giant has faced criticism over the years from some local leaders who have questioned whether it is providing enough community benefits, since it avoids some local taxes. Pittsburgh Mayor Ed Gainey campaigned last year on challenging UPMC’s nonprofit status.

In total, the Lown Institute report said that all nonprofit hospital systems across the United States had a combined fair-share deficit of $18.4 billion.

The Lown Institute calculated fair-share spending based on 2019 tax documents and 2018 documents in instances when 2019 documentation was not available.