property tax (Hospitals, 1988, pp. 5 7). As a consequence, municipal taxing jurisdictions have sought state level action to limit the tax exempt status of nonprofit hospitals through restricting both the scope of qualifying activities and the level of tax exempt income. Increasingly, municipal taxing jurisdictions have also been challenging through judicial action the tax exempt status of nonprofit hospitals.
Heightened scrutiny of income sources and the loss or curtailment of real estate tax exemptions hold serious implications for nonprofit hospitals. Real estate tax exemptions for nonprofit hospitals are linked to both other tax exemptions accorded to the institutions and to the fundamental nonprofit concept. The loss of real estate tax exemptions could, thus, erode the nonprofit status of the institutions, thereby increasing costs without providing for associated revenue increases. In turn, such an outcome would lead to a diminution of the public services provided to communities by nonprofit hospitals.
Over the years, nonprofit hospitals have been pushed and pulled alternatively between the governmental and commercial models. Rosemary Stevens (1989, pp. 295 305) suggested that a shift away from the values of self interest and for profit enterprise that characterized the 1980s will occur in the 1990s toward collective concerns, social obligation, and governmental initiative with respect to nonprofit hospitals.
The continual shifts in social expectations and public policy towards nonprofit hospitals have occurred within a framework of tax exempt status for the institutions. An alteration of the tax policies that support the existing framework could structurally shift the nonprofit form farther toward either the governmental or the commercial model. Such a shift in either direction would lead to far reaching consequences for the ways in which the hospital services resource is financed and distributed. Thus far, thes...