To preserve their tax-exempt status, nonprofit hospitals must meet the Community Benefits Requirements (CBR) that impose significant restrictions on nonprofit hospitals’ financial assistance, billing, and collection practices. For-profit hospitals are exempt from these requirements. We show that financially vulnerable consumers, those most positioned to benefit from CBR, default significantly more if they reside in localities served by for-profit hospitals. These effects are amplified in states with more stringent CBR requirements. Yet these effects are attenuated in states that uniformly regulate all hospitals’ financial assistance, billing, and collection practices. Combined, these regulations shape the geographic distribution of hospitals. For-profit hospitals, not bound by CBRs, have a higher presence in communities where CBR pressures on nonprofit hospitals are most costly: those characterized by lower income and lower credit score consumers. This geographic distribution underscores an unintended consequence of the CBRs— for-profit hospitals serve relatively more financially vulnerable consumers, and by extension, undermine their financial health.

zlynne@ceibs.edu