Substantial Under-Reporting of Medicare and Medicaid Receipts on the Form 990 (Technical Note)

A variety of sources point to substantial underreporting of Medicare and Medicaid revenue by the nonprofit sector:

In 1992, NCCS estimates that private nonprofit hospitals accounted for more than $104 billion of the $149 billion in Medicare and Medicaid payments to hospitals. This estimate was based on examining the allocation of Medicare and Medicaid patient days using the U.S. Health Care Financing Administration’s Hospital Cost Report Information System and allocating total government funding to hospitals (available from the HCFA’s National Health Expenditure Accounts) using the same proportions.

Sixty-one percent of the 4,915 community hospitals in the U.S. are nonprofits. (There are nearly 900 long-term care hospitals and federal government hospitals in addition to the community hospitals.) (American Hospital Association, Hospital Statistics, 2002 edition) Thus, while the allocation of Medicare and Medicaid between nonprofit, for-profit, and government-owned (public) hospitals has not been updated, we expect that nonprofit hospitals still received at least half, if not substantially more, of the $231 billion in government payments to hospitals in 1999. (These government payments are primarily Medicare and Medicaid but also include a small percentage of funds from other sources.)

Independent Sector estimates total government support for health services at $137 billion in 1997. (Independent Sector and the Urban Institute, The New Nonprofit Almanac and Desk Reference, Jossey-Bass, 2002: p. 94).

Unfortunately, the IRS Form 990 data for Medicare and Medicaid revenues appears to drastically underreport these numbers. The weighted 1999 IRS Statistics of Income Sample for 501(c)(3) organizations yields less than $27 billion in total Medicare and Medicaid receipts, regardless of the NTEE category of the organization. Limiting the analysis to health care organizations with NTEEs in the “E” category (hospitals, nursing homes, and other direct care organizations) indicates that only 1,217 of the 16,404 (including more than four thousand organizations in the hospital category) organizations reported any Medicare or Medicaid receipts. Their total receipts were approximately $21 billion.

Version 1 of the 1999 Digitized Data file captures $19 billion in Medicare and Medicaid receipts from 2,579 organizations.

Added 11/20/2002 by tpollak, Modified 05/25/2006 by jauer


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