Reference no: EM131020066

Instructions: Community Hospital is a nonprofit, general acute-care hospital located in a wealthy suburb of City. Last year, it reported revenues of $100 million, and a “profit” (net revenues in excess of expenses) of $12 million. During the course of the year, it provided free emergency-room care to 300 uninsured poor patients out of a total of almost 50,000 patients served during the year. The cost to the hospital of this care (calculated using an average-cost methodology, including administrative overhead) was $800,000. Community Hospital also runs an ambulance service for its community; the expenses for that service are $2 million per year, but the hospital received approximately $1.8 million in insurance reimbursements for ambulance services. It also reported serving some 1500 Medicaid patients. According to the hospital’s accounting department, the reimbursements the hospital received for Medicaid services failed to cover the average costs of those services by $3 million. During the year, the hospital sponsored several community health education “fairs” at which hospital nurses took blood-pressure readings, tested for diabetes, and so forth. These “fairs” were well-attended, serving about 5000 people total. The hospital also runs several pre-natal care seminars each year that enroll about 2000 women from the community, most of whom deliver their babies at Community Hospital. The cost (essentially the pro-rated portion of nurses’ time devoted to these activities) for the year for these health fairs and pre-natal programs was $1 million. "Should Community Hospital be tax-exempt? "