ABOUT THOSE NON-PROFIT HOSPITALS

Your local neighborhood hospital might have been founded as a charitable institution by a religious group or civic-minded citizens as a “not-for-profit” or “non-profit” hospital. By definition, such a hospital does not have shareholders and does not distribute dividends.

Many of these hospitals have grown into huge medical centers. They pay no federal income tax, and generally no state or local government taxes. They can accept donations as tax-deductible for the donor. They can issue bonds.

They have been granted this privilege with the understanding that their primary purpose is to serve the community. This includes caring for those who cannot afford to pay for care, screening and stabilizing ALL patients who come to the emergency room, and benefiting the local community.

Charity care is usually reported by these hospitals as care provided for patients who are uninsured and unable to pay for the care (what we all would understand as charity care) but may also include a variety of other things. For example, some hospitals report the difference between what they charge and what insurers, such as Medicaid, Medicare, and private companies, pay them. Those payments are specified in contracts. As most of us would understand these adjustments, they are contractual write-offs or adjustments, not charity. Your local supermarket does not say they give food as charity because they have a sale on a can of beans and report the difference between their usual price and the sale price as charity. Nor does your auto dealer report a charitable donation when you bicker and obtain a lower price than the initial asking price.

These institutions may also have very high “business expenses” such as marketing, high salaries and bonuses for their executives, first-class travel and perks, expensive offices, fundraising drives, and the latest and most expensive medical gadgets. When this is not sufficient, they can always erect a new building or buy a competitor and deduct the cost from their tax bill.

Health System and Hospital executives are often paid over $1,000,000 per year. See Compensation of CEOs at nonprofit hospitals | Cause IQ. And Executive Compensation at Sutter Health (CA) | Paddock Post.

How do these “not-for-profit” institutions behave? Amazingly, no better than the for-profit institutions, whose stated purpose is to make money for their shareholders. Per the New England Journal of Medicine, July 20, 2023 “In 2018, for every $100 of expenses incurred, nonprofit hospitals in aggregate spent $2.30 on charity care, as compared with $3.80 spent by for-profit hospitals. And in 2019, nonprofit and for-profit hospitals had similar Medicaid shortfalls as a share of total expenses.” Do Nonprofit Hospitals Deserve Their Tax Exemption? | NEJM

Surprised? I was.

The bottom line is that non-profit hospitals can behave as rapaciously as for-profit hospitals. They have sued their own patients for unpaid bills. Consider that the next time your friendly hospital asks for a donation to their “charitable foundation.” or should you be less fortunate, to receive their bill for services.