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ABSTRACT. Pressures to contain costs have given private hospitals the economic incentive to reduce provision of charity care services, shifting the burden onto governmental hospitals. Budget pressures on governmental units have produced resistance to any further shift in the charity care burden. We observe in a lawsuit (State of Texas vs. The Methodist Hospital) what appears to be a classic moral hazard situation. The government expects a certain (unspecified) level of charity care to be performed in exchange for tax exemption; hospital management allegedly consumes perquisites and overstates reported charity care figures. Both sides use accounting numbers to defend their positions.
Alan Blankley and Dana Forgione*
INTRODUCTION
Almost any discussion of healthcare today leads inevitably to a discussion of specific moral choices that must be faced along several different dimensions: medically, families and physicians must often choose if, and when, to discontinue artificial life-support treatment to unresponsive patients; technologically, scientists must decide whether certain innovative treatments are ethically acceptable; economically, administrators must decide how to allocate scarce and costly resources among patients in need. Indeed, one of the principal ethical dilemmas facing both society in general and hospitals in particular is the economic problem of how, and among whom, to distribute scarce medical resources. The underlying question, of course, is whether or not one has a God-given or Constitutional "right" to costly medical care. The issue, while often debated, is beyond the scope of this paper. If we assume for the sake of argument that one does,(') then several attendant questions arise. How does society decide between competing claims on (i.e., effectively ration, whether explicitly or implicitly) scarce medical resources? If all persons have this right, then presumably one's ability to pay for medical care does not affect one's right to medical care. If so, who bears the redistribution of the costs?
One way society addresses this problem in the U.S. is through taxexempt status for not-for-profit (NP) hospitals. The general idea is that the hospital will be economically able to provide healthcare services, including charity care(2)to those unable to pay for it up to the value of its tax exemption. In other words, through exemptions from U.S. Federal, State, and Property taxes,(3) the government encourages private pursuit of "charitable purposes." These charitable purposes,...