for their community benefit expectations attendant to their tax-exempt status.

  1. Tax exemption is only a factor of importance to nonprofit organizations. For public teaching hospitals, colleges, and universities, a community benefit standard aimed at advancing racial and ethnic diversity tied to tax exemption would have no impact on such governmental organizations, as they derive their exempt status as being units of government. In fact, reliance upon tax exemption as a framework for accountability could have the consequence of placing more legal expectations for advancing diversity goals on private, nonprofit institutions than on institutions that receive direct governmental subsidies as public entities.

  2. If tied to tax exemption, the failure of a program to advance diversity goals would lead to the entire organization losing its tax-exempt status. How should one handle a university where diversity goals were being achieved in a variety of schools but failed in the ones that are part of health professionals training? Under the tax code, while there are intermediate sanctions for certain prohibited transactions, failure to meet the overall operational test for community benefit would result in revocation of the entire organization’s tax-exempt status.

  3. Accreditation is an oversight scheme that is attendant to all of the education programs that educate independently licensed health professionals. For some health professions (physician training, for example), there are distinct educational programs for different stages of professional training, each with its own separate accreditation program under a distinct sponsorship. Given the breadth and reach of the various accreditation programs and their ability to independently set standards based on high professional norms, it is a logical place to enforce a set of expectations tied to advancing diversity goals. In addition, the accreditation process often allows institutional individuality in how standards are met, thus encouraging creative approaches to meeting the underlying goals of the accreditation process. Such flexibility has some important advantages when approaching issues like racial and ethnic diversity.

  4. While the issues are complex, it is the case that health professions schools and hospitals of all forms (i.e., nonprofit, investor-owned, and public) receive varying amounts of public resources, whether through tax deferrals, public third-party payments, or direct subsidies. This is especially true in health professions education, which is quite expensive and heavily subsidized for participating students and trainees (Chhabra, 1996). As discussed in Chapter 3, Medicare Graduate Medical Education (GME) provides a significant source of funding for the costs of educating health professionals, particularly physicians. Indirect funding, covering additional teaching costs associated with caring for Medicare patients, is also provided to academic health centers. In 1998, Medicare paid approximately $2 bil-

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