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OPINION: Profitable nonprofits: the scarcity of charitable hospitals

Canva illustration by Virginia Doherty
Canva illustration by Virginia Doherty

Over one-third of the American population is currently in medical debt. 15% of Americans have overdue medical debt — the majority of which is owed directly to hospitals. There’s an estimated minimum of $195 billion currently owed in medical debt by people in the United States.

But don’t worry! Even though many doctors’ salaries decreased due to COVID-19, it’s been on the rise since, and it’s back up to a healthy $352,000 average across all physicians.

At the same time, charity care (free or discounted treatments for those who meet eligibility criteria) has decreased over the last several years as their operating profits and cash reserves have continued to grow.

Even better, that’s a phenomenon being seen in nonprofit hospitals. The tax exemption value of nonprofit hospitals is currently worth a little over $28 billion, while only $16 billion was spent on charity care programs nationwide.

Any organization being designated nonprofit status intends to support the work they do in terms of community involvement and charitable work. Federal support offers them tax exemptions, access to grants, discounts on federal services and a myriad of other money-saving benefits. However, the money being saved by hospitals through their nonprofit status is $12 billion more than the expenditures on actual charity care.

It should come as no surprise that 40% of these hospitals risk losing their nonprofit status as they fail year after year to create and implement a plan identifying and seeking to resolve community health issues. Even fewer of these community health needs assessments (CHNA) are available to the public or properly filled out.

The idea of a nonprofit hospital is fairly logical: offer tax exemptions in return for a focus on charity care. In a profit-driven society, the principle seems straightforward and has great potential to be effective. The issue is, of course, that in a profit-driven society, most organizations will tend towards whatever course of action produces the most profit — even those with a nonprofit status.

The incentive intended to produce a greater community benefit seems to be failing; nonprofit hospitals have been found to have a lower ratio of charity care to total expenses than for-profit hospitals did. From 2018 records, government-funded hospitals spent an estimated 4.1% of total expenses on charity care, for-profits spent 3.8%, and nonprofits spent a mere 2.3%.

These hospitals, which make up nearly two-thirds of all hospitals in the U.S., are avoiding billions of dollars of taxes due to their nonprofit status for community benefits that don’t seem to exist. 

So what, exactly, is the point?

Previously, requirements to gain tax-exempt status involved a certain amount of charity care. But in 1969, that was changed to allow for a large range of activities that offer some form of community assistance.

Essentially, nonprofit hospitals are a scam. A huge, incredibly profitable scam with a large amount of support nationwide.

The idea behind them isn’t misguided or even inherently faulty. Legislation around the requirements, however, has continued to loosen restrictions to qualify for nonprofit status. As the number of nonprofits in America continues to drastically increase, the ability to regulate these hospitals and ensure they’re meeting the necessary benchmarks to qualify for tax-exempt status has greatly decreased.

There needs to be a concerted effort from the U.S. government at the federal and state levels to reevaluate how we treat nonprofits in America — especially when it comes to the system that was designed to keep its citizens safe and healthy. Healthcare is not a sector that can be allowed to charge obscene prices for necessary treatments and be so profit-driven, that the welfare of the American people is left by the wayside.

Medical debt will continue to increase, and nonprofit hospitals have little to no incentive to provide care at a discounted or nonexistent price. 

The American healthcare system is inherently flawed — this isn’t news to any of us. The very systems that are intended to keep modern medicine accessible are only allowing them to create more profit, and even as criticism of nonprofit hospitals grows, little seems to be done from a legislative standpoint or by the hospitals themselves.

We need to reprioritize healthcare as the primary goal and treat hospitals as hospitals, instead of allowing them to be driven by the bottom line.

Virginia Doherty is an opinion writer. Contact her at [email protected]

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About the Contributor
Virginia Doherty, Opinion Writer
Virginia is a sophomore majoring in history and art history with minors in marketing and non-profit studies. She enjoys writing about politics, history, religion, and fashion.
Contact her at [email protected]

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