Hospitals and State Legislatures

Table of Contents

Updated/Material Added: 2/23/2017

According to the American Hospital Association, "In 2008, America’s hospitals treated 123 million people in their emergency departments, provided care for 624 million outpatients, performed 27 million surgeries, and delivered 4 million babies. Hospital care is the largest component of the health care sector, which itself is a growing segment of the U.S. economy."

Hospitals and Federal Health Reform

The ACA created a number of delivery and payment system reforms that aim to pay providers for delivering high-quality and coordinated care. The delivery system reforms that have the greatest potential to reduce costs will also require significant investments from hospitals; these reforms include:

  • A shared savings program to foster accountable care organizations (ACOs);

  • A program to reduce avoidable hospital readmissions; and

  • A national pilot program to bundle payments across providers after a hospitalization.
  • A requirement for non-profit hospitals to document community benefits (Section 9007)
  States Implement Health Reform Banner


These reforms have the potential to reduce hospital and Medicare spend­ing if implemented appropriately. CBO estimates that some of the most signifi­cant delivery system reforms will save Medicare a total of $14.7 billion over 10 years.


*new* An issue brief on Hospitals in the Post-ACA Era: Impacts and Responses, was published by Milbank Memorial Fund in conjunction with the New England States Consortium Systems Organization (NESCSO). The paper, written by Gary Young of Northeastern University, was based on a presentation given at a one-day forum sponsored by NESCSO and the Fund. The brief looks at the ways the Affordable Care Act sought to change the role of hospitals in improving population health, how hospitals are responding to these pressures, and how state governments can ensure those responses are consistent with efforts to improve population health and health care value. Published 2/23/2017.

Hospitals/Systems Report.  A 2015 comprehensive look at the hospital industry, with costs, quality, innovations and challenges described in a 68 page online resource. NCSL has had a 15-year collaborative exchange with this publication series. Posted 4/16/2015.

Hospital spending increased 4.3 percent to $936.9 billion in 2013 compared to 5.7 percent growth in 2012, as reported (Dec. 3, 2014) by the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS.) The lower growth in 2013 was influenced by slower growth in both price and non-price factors (which include the use and intensity of services). Growth in private health insurance and Medicare hospital spending decelerated in 2013 compared to 2012. Total national health spending slowed from 4.1 percent growth in 2012 to 3.6 percent in 2013. 

As rural hospitals struggle, some opt to close labor and delivery units.  About 500,000 women give birth each year in rural hospitals, yet access to labor and delivery units has been declining. Kaiser Health News, 2/23/2016.

Regulating Hospital financial assistance, billing and collections. In December 2014, the Treasury Department and IRS issued final rules that directly address non-profit hospital financial assistance, billing and collections. The regulations finalize the details for a broader ACA mandate that governs how tax-exempt hospitals provide community benefit. Historically, hospital community benefit programs—including financial assistance or free care—have been a mixed bag in terms of content, governance, and level of investment; and states have taken an uneven approach to regulating hospital behavior. While the new regulations leave most of the details to hospitals to decide, they set a new federal floor that greatly increases transparency on financial assistance and collections, provides some protection against medical debt and overcharging, and offers communities greater insight and potential influence on the way hospitals understand and address broader health issues.
      Cost policies will now be available for public review, with hospitals required to disclose detailed information about eligibility, how to apply for help, and how they use third-party data to screen patients for presumptive eligibility. Translation standards for printed and online financial aid materials improved, with hospitals required to translate policies into the primary language of populations to 5 percent or 1,000, whichever is less, of people “likely to be affected or encountered by the hospital facility.”  Read more at Community Catalyst, Jan. 21, 2015.Hospital-Based Strategies report cover

Hospital-based Strategies for a Creating Culture of Health provides background on the Robert Wood Johnson Foundation’s vision to build a Culture of Health and discusses how hospitals are contributing to community health improvement. American Hospital Association; October 2014 [PDF, 44 pp]

Kaiser Health News: Study: Highest-Charging U.S. Hospitals Are For-Profits, Concentrated In Florida
Kaiser Health News staff writer Jenny Gold reports: "Talk about sticker shock: Some U.S. hospitals charge patients more than 10 times the rates paid by Medicare. Of the 50 U.S. hospitals with the highest charges, 49 are for-profit institutions, 20 operate in Florida, and half are owned by a single chain, according to a study published in the journal Health Affairs 6/8/2015." (Gold, 6/8)

Hospital acquired conditions decreasedThe Department of Health and Human Services announced that new preliminary data show an overall nine percent decrease in hospital acquired conditions nationally during 2011 and 2012.  National reductions in adverse drug events, falls, infections, and other forms of hospital-induced harm are estimated to have prevented nearly 15,000 deaths in hospitals, avoided 560,000 patient injuries, and approximately $4 billion in health spending over the same period.  The Affordable Care Act is also helping reduce hospital readmissions.  After holding constant at 19 percent from 2007 to 2011 and decreasing to 18.5 percent in 2012, the Medicare all-cause 30-day readmission rate has further decreased to approximately 17.5 percent in 2013.  This translates into an 8 percent reduction in the rate and an estimated 150,000 fewer hospital readmissions among Medicare beneficiaries between January 2012 and December 2013. You can view the HHS report here, released 5/7/2014

Trends at Minnesota’s Community Hospitals: 2009 to 2012. This issue brief was released in January 2014 by Health Economic Program at the Minnesota Department of Health.

Hospital Inpatient Pricing Up Sharply per AHIP  (Excerpted from  HealthLeaders Media, March 20, 2013)
Prices for inpatient hospital care rose 8.2% between 2008 and 2010, with wide price and cost growth fluctuations recorded across states and localities over the timeframe, according to a study by America's Health Insurance Plans.  Even after adjusting for more numerous or complex procedures performed per admission, prices climbed sharply for most types of hospitalizations. Unadjusted hospital prices per admission rose from $13,016 in 2008 to $15,236 in 2010, an average annual growth rate of 8.2%, said the study.   

Trends in Inpatient Hospital Prices, 2008 to 2010, in March 2013 edition,  The American Journal of Managed Care.

American Hospital Association Rebuttal:  AHA in a statement given to HealthLeaders Media, dismissed the study's findings as "simply a rehash designed to divert attention from the harmful consumer impacts of health insurers' own rising premiums. Hospitals across America are examining ways to make care more affordable by better coordinating care, reducing red tape, and providing the right care at the right time in the right setting. These efforts have led to hospitals to hold costs down, keeping health care spending growth at historically low levels for the third straight year and the rate of growth in hospital cost per service is at a decade-low."

Penalties for Avoidable Hospital Readmissions (added February 2013)
"The readmission penalty in the ACA is based on readmissions for three conditions: Acute Myocardial Infarction (AMI), Heart Failure, and Community Acquired Pneumonia.  For each hospital, the Centers for Medicare and Medicaid Services (CMS) calculates the risk-adjusted actual and expected readmission rates for each of these conditions.  Risk-adjustment variables include demographic, disease-specific, and comorbidity factors.  The excess readmission ratio is the actual rate divided by the expected rate. Simplifying a little, the penalty is the excess readmission percentage times aggregate payments for those admissions, e.g., if a hospital had a 20 percent AMI readmission rate but an expected rate of 15 percent, it would be penalized one-third — (20/15)-1 — of its revenue from AMI readmissions.  The total penalty is the sum of the penalties for the three conditions, provided that the total amount does not exceed 1 percent of Inpatient Prospective Payment System (IPPS) payments in fiscal year 2013, a cap that increases to 3 percent of inpatient revenue in fiscal year 2015."
> This excerpt is from the HealthAffairs Blog, Will The Readmission Rate Penalties Drive Hospital Behavior Changes?, February 14, 2013, By Nikhil Sahni, David Cutler, and Robert Kocher.

Non-Profit Hospital and Community Benefits
The Hilltop Institute’s Hospital Community Benefit Program, is a central resource for policymakers who seek to ensure that tax-exempt hospital community benefit activities are responsive to  community health needs.  The Institute has released a number of new resources. [links added April 2013]pdf format of    2011 Health Care Cost Trends and Cost Drivers Report

  • What Are Hospital Community Benefits? -  A Fact Sheet gives a brief overview of hospital community benefits and considerations for state and local decision-makers.
  • Community Benefit State Law Profiles, a compilation of each state’s community benefit laws and regulations analyzed in the context of the Affordable Care Act’s (ACA’s) community benefit framework. An interactive map links to each state’s Profile and a summary table compares community benefit laws from state to state.
  • Hospital Community Benefits after the ACA: The State Law Landscape - An issue brief presents the Profiles’ findings and begins the analysis to facilitate a better understanding of each state’s community benefit landscape and its significance in the context of national health reform. [16 pp, PDF]pdf format of    2011 Health Care Cost Trends and Cost Drivers Report
How Nonprofit Hospitals Must Prepare for IRS Changes

Provisions in the Patient Protection and Affordable Care Act mandate new requirements for nonprofit hospitals that wish to retain their tax-exempt status. Failure to comply can cost providers up to $50,000 in penalties. A tax expert explains how to prepare for the new rules.

Section 9007 of the PPACA created new requirements for nonprofit hospitals that must be followed to retain tax-exempt status. The new rules mandate such hospitals to administer community health needs assessments and to clarify and make known their financial assistance policies. A community health needs assessment entails nonprofit hospitals assessing the effectiveness of their efforts to meet the needs of the community they serve and to provide public access to the findings, and that holds true for the financial end of things too, in terms of how much financial assistance they provide.  The IRS tax forms 990 and 990 Schedule H will be used to gather information about a hospital through the community needs assessment to determine if they really are operating for the community’s benefit. So the needs assessment for 2012, when these PPACA provisions take full effect, will be very important because [hospitals] will have to prove community benefit. Nonprofit hospitals need to do these community needs assessments every three years, too. If they don’t they are subject to a $50,000 penalty.  Adopted from material published  by HealthLeaders Media Finance, (C) 1/31/2011. 

Additional Resources

NCSL has compiled several useful resources on hospitals and the varied roles of state legislatures play in supporting, regulating and funding them.

NCSL Resources

Background and Figures

NCSL provides links to external and third party websites as a convenience; the organization is not responsible for the content or opinions on such sites or in such publications.

Annual survey of hospitals in the United States.  The American Hospital Association conducts a survey; the following is a sample from the 2010 annual, released as AHA Hospital Statistics, 2012 edition. The definitive source for aggregate hospital data and trend analysis, AHA Hospital Statistics includes current and historical data on utilization, personnel, revenue, expenses, managed care contracts, community health indicators, physician models, and much more.

Hospital Statistics are published annually by Health Forum, an affiliate of the American Hospital Association. Additional details on AHA Hospital Statistics and other Health Forum data products are available at For further information or customized data and research, call the AHA Resource Center at (312) 422-2050.

   Total Number of All U.S. Registered * Hospitals


         Number of U.S. Community ** Hospitals


               Number of Nongovernment Not-for-Profit Community Hospitals


               Number of Investor-Owned (For-Profit) Community Hospitals


               Number of State and Local Government Community Hospitals


        Number of Federal Government Hospitals


        Number of Nonfederal Psychiatric Hospitals


        Number of Nonfederal Long Term Care Hospitals


        Number of Hospital Units of Institutions
        (Prison Hospitals, College Infirmaries, Etc.)




   Total Staffed Beds in All U.S. Registered * Hospitals


        Staffed Beds in Community Hospitals


   Total Admissions in All U.S. Registered * Hospitals


        Admissions in Community** Hospitals


   Total Expenses for All U.S. Registered * Hospitals


        Expenses for Community** Hospitals




   Number of Rural Community** Hospitals


   Number of Urban Community** Hospitals




   Number of Community Hospitals in a System


   Number of Community Hospitals in a Network






















         *Registered hospitals are those hospitals that meet AHA's criteria for registration as a hospital


[1] Taking the Pulse: The State of America's Hospitals. Published by American Hospital Association (AHA), 10/06.
[2] The Costs of Caring: Sources of Growth in Spending for Hospital Care. Published by AHA, 10/05.
[3] Chartbook: Trends Affecting Hospitals and Health Systems, April 2007 - designed to provide helpful analysis of key topics in health care. Inside, you’ll find charts and graphs depicting key trends. By American Hospital Association, 4/07. 

 Staff contacts:  Richard Cauchi, Program Director; Steven Landess, Research Analyst, NCSL Health Program, Denver