Rural hospitals and hospitals that treat patients regardless of their ability to pay have been hampered by federal rules limiting their access to funding for capital projects – making it harder for them to generate revenue and achieve financial stability, according to a new policy paper.

This, in turn, has led to institutionalized racism in hospitals, according to Rosemary Batt ’73, the Alice Cook Professor of Women and Work in the ILR School, who co-authored “Structural Determinants of Health: Hospitals’ Unequal Capital Investments Drive Health Inequalities,” published in July by the Center for Economic Policy Research.

“A hospital’s ability to raise capital is the direct result of laws, like the Hill-Burton Act of 1946, the 1965 Medicare and Medicaid law, and subsequent IRS rulings that have disproportionately helped large nonprofit health care corporations,” Batt said. “As a result, rural hospitals and those serving low-income Black, Indigenous and immigrant communities are unable to keep up. As their technologies continue to fall into disrepair, or become obsolete, their patients suffer.” 

In the report, Batt and co-author Eileen Appelbaum, co-director of the Center for Economic Policy Research, suggest that U.S. policymakers and regulators rethink the way government finances are allotted to health care facilities.

The authors propose legislation that targets new construction, renovation and modernization of hospitals in communities where it is most needed. For example, they say, the Hill-Burton Act of 1946 provided extensive public funding for the construction of nonprofit hospitals and was designed to remedy shortages of hospital capacity in poor and rural communities, a goal it largely succeeded in fulfilling. Unfortunately, Hill-Burton also incorporated the legally and socially enforced segregation of that time into the law, funding separate facilities for Black and white patients.

“Hill-Burton was the largest infusion of public funds to build a nationwide hospital infrastructure in the country’s history,” Appelbaum said. “And while the practice of segregated facilities was halted in 1964, the legacy of racial segregation, inferior hospitals and worse health outcomes on average for minority patients persists to the present day.”

To fund a new act, the authors suggest changing the tax laws, specifically an IRS ruling from 1998 that allowed nonprofit hospitals to create for-profit subsidiaries whose profits are tax-exempt. By taxing those profits, the money generated could be used to subsidize such an initiative, they said. 

“Central to our argument is that federal government policies and funding formulas played a critical role in fostering these inequalities across health care systems in different communities, especially low-income and rural communities,” Batt said. “Those government policies got low-income hospitals into this mess, so they must take a prominent role in getting them out.” 

Julie Greco is a senior communications specialist for the ILR School.