Graduation Year

2026

Date of Submission

4-2026

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Sarah Robinson

Abstract

Non-governmental, non-profit hospitals receive significant property tax exemptions in exchange for providing community benefits. The consequences of requiring non-profit hospitals to spend a higher community benefits minimum in order to receive property tax exemption are poorly understood. This paper asks whether the 2012 Illinois community benefits minimum policy change, as written in statute 35 ILCS 200/15-86, reduced non-profit hospital investment in the capital assets of land, buildings, and equipment. Using a difference-in-difference design that exploits the 2012 Illinois policy change as a natural experiment, non-profit hospital investment in Illinois is compared to non-profit hospital investment in all other U.S. states from 2009 to 2023, using IRS Form 990 from the National Center for Charitable Statistics. The results show that the 2012 policy is associated with a predicted decrease in aggregated investment in land, buildings, and equipment of 37%, statistically significant at the 1% level. This is equivalent to a decrease of investment of approximately $1.45 million per non-profit hospital and $209 million across all 144 Illinois non-profit hospitals in the dataset. Analyzing capital assets separately, investment in land declined by 23.47% and was statistically significant. Effects on buildings and equipment were statistically insignificant. Evidence of time heterogeneity reveals that aggregated capital asset investment initially increased 63% after 2012 but declined by 69% after 2015. All capital asset categories followed this same pattern of an increase after 2012 and decrease after 2015. This suggests a delayed behavioral adjustment as hospitals gradually reallocated budgets toward compliance. Contrary to the policy’s intent, after it went into effect, community benefit spending decreased by 38.31%, indicating that Illinois hospitals may have rationalized spending downward toward the new minimum threshold. These findings suggest that community benefit mandates generate measurable unintended costs by crowding out hospital capital investment, with implications for long-run healthcare capacity and the communities these policies aim to serve.

Download

Share

COinS