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Debate over tax breaks for nonprofit Cleveland area hospitals is also about racism and redlining

Debate over tax breaks for nonprofit Cleveland area hospitals is also about racism and redlining

by Stephanie Czekalinski & Michael Indriolo 

This is part two of a series examining the tax-exempt status of nonprofit hospitals in Northeast Ohio and how the loss of tax dollars impacts communities.

Plain Press, August 2022        Nonprofit hospitals like the Cleveland Clinic receive millions of dollars in property tax exemptions in Cuyahoga County every year, an Ideastream analysis of county records shows. The debate over what the public should get in exchange for those tax breaks is complicated by racist policies of the past like redlining.  (University of Richmond)

     For years, hospitals and public policy wonks have been engaged in an ongoing debate over whether nonprofit hospitals provide adequate benefits to the community to make the tax breaks they receive a good deal for taxpayers.

     On one side, the Clinic and other not-for-profit hospital officials say they provide community benefits worth billions of dollars annually in exchange for those tax breaks: millions of dollars spent on charity care, community health improvement, medical education and training and research, millions more pledged to remove lead from Cleveland homes and a deal brokered to bring a grocery store to a neighborhood suffering from food insecurity.

     On the other side, industry analysts argue hospitals are playing fast and loose with the numbers and that they actually receive millions of dollars more in tax breaks than they provide in care and services that directly benefit their home communities

     But those living in the neighborhoods near the Clinic and University Hospitals on Cleveland’s East Side say the debate is further complicated by the history of racist policies like redlining that still affect Clevelanders today. And many sociologists and historians agree.

     Redlining helped create health problems that disproportionately plague African American Clevelanders, said Dr. Todd Michney, a history and sociology professor at Georgia Tech University and an expert on 20th-century African American upward mobility in Cleveland.

     Redlining was part of a federal program started in the 1930s that rated neighborhoods across the country to help mortgage lenders predict whether an area was a good financial risk. African American neighborhoods were deemed ‘hazardous” risks, which led to decades of disinvestment, according to the University of Richmond.

     “Sociologists have taken the [redlining] data … and found that across the board, these real estate predictions correlate with bad health outcomes (today),” Michney said. “The correlation is striking.”

     While no one is suggesting that tax dollars from nonprofit hospitals alone could remedy the problems caused by redlining, policy experts say it is important to consider whether taxpayers are still striking the right deal with nonprofit hospitals because abatements may deprive Clevelanders — especially those living in historically redlined areas — of resources needed to overcome the long-term effects on their health.

     Tax policy is important because it is directly and irrevocably connected to what kinds of lives Cuyahoga County residents are going to live, said Zach Schiller of Policy Matters Ohio, a liberal non-profit research group.

     “Are we going to have parks? Are we going to have health services? Are we going to have good education?” he asked. “This is what taxes pay for.”

     If large nonprofit hospitals “are not contributing, how can you expect that you’ll have the resources you’ll need for public health or any of the other multitudes of other services that are needed?” he added.

     Many of the people living in the historically redlined neighborhoods around the Cleveland Clinic’s main campus agree.

Redlining, Cleveland and the Cleveland Clinic: A history.

     When the Cleveland Clinic opened in 1921, at the corner of Euclid Avenue and East 93rd St., the surrounding neighborhood was changing.

     African Americans were moving in, and that was making some people anxious, according to a neighborhood description card from the Home Owners’ Loan Corporation (HOLC).

     HOLC was the federal agency that in the 1930s graded neighborhoods in nearly 250 cities nationwide, rating them A, green, “best”; B, blue, “still desirable”; C, yellow, “definitely declining”; and D, red, “hazardous.”

     This was the organization that created the color-coded maps that give us the term “redlining.”

     Before World War I, the area had “only a scatter of colored occupancy,” reads the card, which dates to the 1930s and rated the neighborhood “hazardous.”

     That redlining resulted in decades of systematic economic disinvestment in neighborhoods deemed “hazardous.”

     HOLC offers this description of African American migration in Cleveland: “From the period of 1920-30 colored infiltration came very strongly along the thoroughfare of Cedar in the north and Quincy in the south (almost totally colored now) … There is a concerted effort being made by the better class colored in this … area along E.105th north of Wade Park but institutions have agreed not to sell to them.”

     The maps created by the federal agency were used to determine which areas in the city were safe investments for banks and mortgage lenders.

     “Race was a key — arguably the key — variable in determining these grades,” according to the University of Richmond. “Neighborhoods of color received D or C grades with only white neighborhoods receiving A and B grades.”

     Fairfax and other neighborhoods around the Clinic were among many predominantly African American neighborhoods that were redlined or given a D grade of “hazardous” in the 1930s, data analysis from the University of Richmond shows.

     Eighty-three years later, Fairfax is still a predominately African American neighborhood and many there are struggling. In 2021, 92% of residents were African American and more than a third lived in poverty, including more than half of the families with children, according to the Center for Community Solutions, a Cleveland-based nonpartisan think tank.

     Fairfax residents have shorter life expectancies and are more likely to suffer from asthma, diabetes, high blood pressure, kidney disease, obesity and pulmonary disease than people who live in some other Cleveland neighborhoods, the University of Richmond data show.

     That is a tough pill to swallow for those living within walking distance of the Clinic, which is ranked the second best hospital system in the nation by U.S. News & World Report.

     “The people [who] live here are some of the most unhealthy, but yet they have one of the most amazing institutions in the country right there,” said Shannon Yarbrough, a Central neighborhood resident, near the Clinic, who works as an occupational therapist and holistic practitioner at St. Vincent Charity Medical Center.

     “We have the top tier hospital organizations within our presence in the city,” said Robin Brown, a Cleveland resident and founder of Concerned Citizens Organized Against Lead. “Why is the health of Clevelanders so bad?”

Social determinants of health

     The answer to why health disparities persist in under-resourced Cleveland communities is more complicated than whether people are able to get an annual physical.

     The vast majority — an estimated 80% — of a person’s health is determined by factors outside medical settings, according to a discussion paper in the National Academy of Medicine.

     Environmental and social circumstances, such as neighborhood safety, employment, poverty, health care access, transportation, food insecurity, air pollution, housing, and education have been identified by health officials as key indicators in determining the health and well-being of a community.

     Cleveland Clinic officials say the health system contributes to a number of programs that work to address social determinants of health.

     The Clinic supported a resolution from the city of Cleveland declaring racism a public health crisis in 2020 and pledged to double its spending on products supplied by women-and-minority-owned businesses in Cleveland to $160 million by 2025.

     The Clinic also joined a coalition of the 37 largest employers in the U.S. to train, hire and promote one million African Americans over the next 10 years.

     Earlier this year, The Cleveland Clinic Foundation donated $50 million to the City of Cleveland’s program to eradicate lead poisoning in homes, which has been a major issue impacting the health of children for years.

     The Clinic is also one of the partners in a $52.8 million project to bring a new Meijer grocery store and apartment complex to the Fairfax neighborhood after residents told them that food insecurity was one of the biggest issues they faced.

     But a spokesperson said that the hospital can’t deliver everything.

     “Your income, how gainfully employed you are, your educational attainment — all those things, we know, factor into one’s health and life expectancy,” said Vickie Johnson, the Clinic’s director of economic development and community engagement. “And none of those things we directly deliver.”

     The Clinic and other nonprofits, however, do make decisions about where to target their dollars, which has a financial impact in Cleveland.

     The Clinic spends vast amounts of money in the Fairfax neighborhood, said August Fluker, a local architect who’s lived in the neighborhood for the last 22 years and is a member of the Cleveland City Planning Commission.

     “They’re bigger than any CDC,” he said, referring to the community development corporations that are tasked with revitalizing city neighborhoods, including ones, like Fairfax, that have faced significant disinvestment.

     Clinic officials often tout the institution’s economic impact on the local community when questioned about the $84 million in property tax breaks, at least, that it gets each year.

     “Our most recent Economic and Fiscal Impact Report, examining 2019 data, shows that more than 133,000 jobs in Ohio, generating approximately $8.8 billion in wages and earnings, were directly and indirectly attributed to Cleveland Clinic,” a spokesperson wrote in an email.

     Fluker said the way to improve health outcomes in Fairfax is to give people access to the Clinic’s economic machine, allowing them to generate wealth for their own families.

     To land many of the jobs in the healthcare sector, people need solid educational opportunities. And that brings us back to property taxes, said Schiller of Policy Matters Ohio.

     “If they want a workforce that’s qualified, they have to have a workforce that’s been educated,” he said. “Who’s educating that workforce, and who’s paying for it?”

     The tax bill on the exempt property owned by Cleveland Clinic, University Hospitals and St. Vincent would be about $113 million a year, according to Ideastream’s analysis. About two-thirds of that — about $68 million — would go to local schools, according to the County Fiscal Office.

     That money could help plug funding gaps for districts like the Cleveland Metropolitan School District, which in fiscal year 2022 is expected to run a deficit of over $122 million, according to District budget reports.

     Besides jobs and education, one’s environment, including access to green space, can affect one’s health, according to a study published in the International Journal of Environmental Research and Public Health. Fluker said in a lot of ways, the Clinic’s campus is the environment for Fairfax residents.

     Located in the heart of the main campus, a block-long shallow pool studded with river rocks and lined with grass and trees mark the main entrance to the Cleveland Clinic.

     “They call it the allée, with the trees and the reflecting pond and the nicely curated stones,” Fluker said. Allée is a French word that means a garden pathway often lined with trees. There is a famous one in Tuileries Garden in Paris.

     The allée at the Cleveland Clinic is a rare piece of manicured green space in a neighborhood marked by overgrown lots and homes falling into disrepair.

     A few years ago, Fluker took his young son on a walk past the pool. The little boy jumped out of his wagon in excitement when he saw the water and the grass, he said.

     “As soon as my son’s starting to approach, it was an all-out sprint by police” to stop him from crossing onto the grass near the pool, Fluker said, adding he doesn’t think the installation was meant to welcome people. “It’s intended to make this grand ceremonial gesture so you can see the new glass structure that was created to sort of mark that the Clinic’s in this community. What does that have to do with people in this community?”

     Before social determinants of health can be addressed, there needs to be a change in the way the Clinic thinks about the people who live in Fairfax, Fluker said.

     “To be totally candid, it’s doing ‘for.’ It’s not doing ‘with.’ And there’s not a lot of doing ‘with.’ It’s just doing ‘for’,” he said. “And it’s all about, really, the Clinic’s benefit.”

Giving away big money to care for others

     The Clinic relies on people who do care to fulfill its mission. The hospital counts on generous support from donors to provide care and do ground-breaking research, officials said.

     In late May, the hospital held a ceremonial groundbreaking event for an expansion of the Cole Eye Institute.

     Inside, philanthropists and their families, hospital leaders and staff and media sat on folding chairs or perched at high-top tables covered in white tablecloths under a white event canopy. People took pictures and television videographers jockeyed for the best views of the stage.

     Philanthropist Jeffrey A. Cole, whose $31.5 million donation made the expansion possible, stepped to the podium, adjusted his reading glasses, and looked out over the crowd assembled to honor him and his wife, Patricia O’Brien Cole.

     Helping others is the best way to make yourself a better person and the world a better place, he said.

     Then he made comments that included part of the physicians’ Hippocratic Oath:

     “‘I would remember that I do not just treat a fever or a cancer, but a sick human being whose illness may affect the person’s family and economic stability,’” he said. “’My responsibility includes these related problems. I will remember that I remain a member of society with a special obligation to all my fellow human beings.’”

     “These words from an ancient doctor should today be heeded not only by medical practitioners,” Cole said, “but by all those and all of us here in a position to influence the betterment of our fellow human beings.”

     After Cole’s speech, the spades bit into the earth, and construction of the new building began.

                  This is the second part of a three-part series that examines the impact of nonprofit hospitals in Northeast Ohio and their effects on our community. Part three of the series will be published on Thursday. METHODOLOGY: Ideastream Public Media used data from the Cuyahoga County Fiscal Officer to calculate the size of nonprofit hospitals’ property holdings in the county. The dataset is not comprehensive. The numbers presented in this article are estimates based on our analysis of publicly available data. The data provided to Ideastream Public Media reflects values as of Cuyahoga County’s 2018 assessments. It does not include properties for which nonprofit hospitals are currently seeking exemptions. The data provided by the County does not necessarily list a hospital’s current hospital system affiliation. In those cases, hospital properties were identified through Ideastream research. This project is part of Connecting the Dots between Race and Health, a project of Ideastream Public Media funded by The Dr. Donald J. Goodman and Ruth Weber Goodman Philanthropic Fund of The Cleveland Foundation.

This article was provided to the Plain Press by the online publication The Land, a local news startup that reports on Cleveland’s neighborhoods and inner ring suburbs. The Land delivers in-depth stories that foster accountability, inform the community, and inspire people to take action. The Land can be accessed at https://thelandcle.org.

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