Abstract
The tax exemption of not-for-profit hospitals has been under scrutiny for over 50 years, but the impact of the recent Patient Protection and Affordable Care Act (ACA) has not yet further informed this debate. This study aims to determine whether there are any unintended consequences of the ACA that impacts current tax law over not-for-profit hospitals either in the form of 1) a financial windfall because of lowered uncompensated care expenses or 2) a financial harm as a result of increases in lower margin Medicaid revenues. This study finds that the decrease in uncompensated care expenses post-ACA had a significant effect on net operating margins but not cash reserves; in addition, a difference-in-differences regression indicates that not-for-profit hospitals were not disproportionately impacted after the ACA took effect. As a result, this study provides evidence to policymakers and public interest groups to support the current tax exemption benefit for not-for-profit hospitals.