Hospitals account for a significant amount of health care’s enormous 550 million metric ton greenhouse gas (GHG) footprint. That is largely because hospitals are remarkably energy inefficient.
In 2023, just 37 — substantially less than 1 percent — were Energy Star certified by the Environmental Protection Agency (EPA) for Scope 1 and 2 energy efficiency. The innumerable and unrelenting health harms associated with GHG emissions disproportionately harm Medicare and Medicaid beneficiaries and minorities. They pay the greatest climate penalty.
Nevertheless, the Department of Health and Human Services (HHS) has failed to issue regulations to reduce and eliminate health care’s greenhouse gas emissions by, for example, reforming Medicare and Medicaid Conditions of Participation. On its own, the health care industry has not taken meaningful steps to decarbonize, much less publicly report their emissions or divest from fossil fuels. To appreciate the impact of health care’s carbon footprint, per recently published data from the EPA, the social cost of just three industry greenhouse gas emissions conservatively equals upward of $3.6 trillion annually.
Considered an unrelated problem, federal health care policymakers have for decades questioned whether non-profit hospitals — that today number approximately 3,000 — are meeting the IRS’s community benefit standard to qualify for or maintain their federal tax-exempt status.
Since 1969, the IRS has required non-profit hospitals to meet organizational and operational tests that demonstrate that they are promoting the health of the community they serve. In 2008 the IRS added a Schedule H worksheet to Form 990, filed annually by tax-exempt organizations, that categorizes community benefits. These include “community building activities” that result in “environmental improvements.” In 2010 the Affordable Care Act added additional community benefit criteria that includes conducting community health needs assessments with accompanying implementation strategies.
The community benefit standard is, however, just that. The IRS doesn't have the authority to specify community benefit activities or community benefit spending. This means that non-profit hospitals have, as the Government Accountability Office (GAO) concluded in 2008, “broad latitude to determine the services and activities that constitute community benefit.”
Research findings have repeatedly shown non-profit hospital community benefit spending does not approximate the value of their tax exemption; a 2023 Kaiser Family Foundation study concluded the federal tax exemption-to-community benefit ratio was 3:2. And because aggressive debt collection raise human rights questions, last August Senate Republicans Bill Cassidy (La.) and Chuck Grassley (Iowa) and Senate Democrats Raphael Warnock (Ga.) and Elizabeth Warren (Mass.) wrote to the IRS and the Treasury Dept. stating they were “alarmed” that non-profits were exploiting an “overly broad definition of ‘community benefit’ and engaging in practices that are not in the best interest of patients.”
They cited a 2023 Lown Institute study that concluded 1,700 non-profit hospitals spent 77 percent less on charity care than the estimated value of their federal tax exemption and were “denying care from patients who have unpaid medical bills.” Citing 2020 work by the GAO that showed Schedule H reporting failed to specify funds used to improve facilities, equipment and patient care, the senators urged the IRS to prioritize Schedule H reviews.
As noted, Schedule H allows non-profit hospitals to include “community building activities” that “improve the community’s health or safety.” This includes, Schedule H instructions state, addressing “environmental hazards that affect community health, such as ... air pollution.” Schedule H prohibits “expenditures made to reduce the environmental hazards caused by, or the environmental impact of, its own activities ... unless [emphasis added] expenditures are for an environmental improvement activity that is provided for the primary purpose of improving community health, addresses an environmental issue known to affect community health, and is subsidized by the organization at a net loss.”
Community health is clearly improved by reducing greenhouse gas emissions into the environment. Today, the burning of fossil fuels annually accounts for 350,000 U.S. deaths and 10 million total globally. Hospitals could readily argue a net loss would be realized via reduced healthcare utilization. For example, lower GHG emissions would likely reduce spending on Medicaid inhalers, which, between 2012 and 2018, increased by 120 percent. Reasoning aside, disallowing 3,000 non-profit hospitals from reporting reduced GHG pollution as a community benefit defies logic.
Possibly the best way for non-profit hospitals to achieve these goals simultaneously is by developing shared or community solar projects. The Department of Energy (DOE) defines community solar as either an on- or off-site solar array installation serving a defined geographic area that benefits multiple customers — for example a non-profit hospital, a community health clinic and a patient population.
The DOE estimates there are today over 2,5000 community solar projects operating in 43 states and the District of Colombia in part because more than half of these states have enabling legislation and 17 have low-income community solar legislation. In an effort to create more energy independence and resilience, FEMA just announced it will begin subsidizing hospitals to install solar power in response to worsening climate-charged disaster events.
Simply explained, a non-profit hospital would work independently or in partnership to identify a solar array location. If not located on the hospital’s property, warehouse roofs are commonly exploited via lease agreements. The hospital can own the installation or not. The hospital-led community solar subscriber organization, under contract with a local utility, would feed community solar energy into the utility’s distribution grid. The utility would deliver electricity from its mix of resources to community solar subscribers. Community solar subscribers would receive from the utility monthly credit as compensation for their share of the total solar generated. In turn, solar subscribers would make a monthly payment to the community solar subscriber organization to cover operating costs.
Likely the most innovative and unprecedented use of community solar to improve community health is Boston Medical Center’s recent DOE proposal. The largest safety net provider in New England proposed developing rooftop solar to pay its Medicaid patients’ utility bills. High energy burden affects more than two-thirds of low-income households but less 5 percent of solar capacity nationwide is dedicated to low-income communities. Boston Medical Center’s proposal would exploit Inflation Reduction Act (IRA) renewable energy tax credits that can amount to roughly 50 percent of installation costs. (The IRA makes available to non-profits or tax-exempt entities tax credits in the form of direct payments.) Additional savings are realized via solar kilowatt hour prices that are superior to fossil fuel-generated electricity. These factors combined allow for community solar subscribers to profit and helps explain why community solar has grown 121 percent year-over-year since 2010.
There are additional reasons for non-profit hospitals to mitigate their emissions. Among others, the means by which hospitals provide care should not cause or exacerbate the health harms they seek to treat or cure. Because the health harms from greenhouse gas emissions are largely foreseeable, absent decarbonizing healthcare’s business model can be described as reckless and negligent — the worst sort of moral hazard. Healthcare should not inherently beg patient safety concerns.
This is particularly true since the economics of renewable energy are far superior to fossil fuels. As a technology — not a commodity — renewable energy is abundant, is far more efficient, has no marginal costs, demonstrates exponential price declines, increasing investment returns, and has a negligible impact on the environment. Use of renewables consequently leaves non-profit hospitals more financially and environmentally sustainable, and enables them to meet current and pending climate-related regulations (for example, California’s climate accountability legislation). Use of renewable energy would encourage hospitals to participate in the EPA’s Energy Star program, or the IRS could stipulate a Schedule H “environmental improvement” requirement.
Considering public health is “at the mercy of fossil fuels” and the fact the healthcare industry remains uncommitted to reducing its greenhouse emissions, federal healthcare policymakers should spend far less time questioning or threatening non-profit hospitals’ tax-exempt status and far more time working with the IRS to persuade non-profit hospitals to make “community building” investments in renewable energy.
David Introcaso, Ph.D., is an independent healthcare policy consultant specializing in climate crisis-related healthcare policy reform. He has conducted environmental and healthcare policy research for the U.S. Congress and the Department of Health and Human Services. He also is the creator and host of “The Healthcare Policy Podcast.”
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