The Uncharitable Side of Nonprofit Hospitals: How Major Players Exploit Tax Loopholes and Neglect Low-Income Patients

Unpacking a startling revelation: some nonprofit hospitals, though swimming in the benefits of massive tax breaks meant to fuel affordable healthcare, instead favor the flourishing of executive bank accounts over the welfare of low-income patients.

Senator Bernie Sanders, an unwavering voice in the arena of healthcare advocacy, unleashed a report that unveils a somewhat bitter truth about the practices at several major nonprofit hospitals in the U.S. Sanders, who heads the Senate Health, Education, Labor, and Pensions (HELP) Committee, outlined a stark contrast in the intent and action of these hospitals.

While the hospitals in question netted $28 billion in tax breaks in 2020 (all intended to bolster affordable healthcare), they seemed to sidestep the inherent responsibility that comes with those benefits. The federal government, offering these tax breaks, mandates that such hospitals ensure low-income individuals have access to medical care at little to no cost, aptly named ‘charity care’.

In what seems like a storyline extracted from a corporate drama, Sanders highlighted that many of these nonprofit hospitals are not only reducing the charity care provided to struggling families but also ensuring their CEOs bask in a rain of lucrative compensation, even amidst global health crises.

Peering into the chasm between ethical practice and reality, the report scrutinizes 16 of the nation’s largest nonprofit hospital systems, revealing a landscape where hospital chains spend merely 57% of the value of their tax breaks on actual charity care in 2020. And, let’s not forget the executive compensation ballooning in parallel – CEOs from the scrutinized chains collectively soaked up over $140 million in 2021!

Take, for instance, CommonSpirit Health, which endowed its outgoing and incoming CEOs with a whopping $32 million, all while earmarking a mere 1.5% of its revenue for charity care.

Then there’s the heart-wrenching tale of Carrie Barrett, who in 2007 walked out of a Methodist Le Bonheur hospital with a $12,019 bill post a crucial heart procedure. Earning less than $12 an hour, Barrett was engulfed by a bill that, thanks to interest and collections, ballooned to over $33,000 by 2019. Stories like Barrett’s aren’t mere outliers; they reflect a systemic issue.

Even as nonprofit hospitals watched their revenues and operating profits ascend, their charity care contributions failed to follow suit. A staggering 86% of them spent less on charity care than they reaped in tax benefits from 2011 to 2018. Moreover, the average operating profit spiked by more than 36% from about $43 million to almost $59 million between 2012 and 2019.

While profits surge and executives luxuriate in hefty compensation, patients find themselves grappling with care avoidance due to prohibitive costs. This alarming reality doesn’t merely spotlight a flaw in a system – it underlines a critical failure in fulfilling moral and legal obligations by entities that exist to serve community health needs.

Sanders, calling the scenario “absolutely unacceptable”, articulates a sentiment that is likely shared by the 85 million uninsured or underinsured Americans, and by those who witness over 60,000 of their compatriots perish annually simply due to an inability to afford timely medical intervention.

The report isn’t just an exposé; it’s a call to arms for Congress and the IRS to re-establish and enforce the accountability of nonprofit hospitals. Suggested strategies range from ensuring charity care levels are consistent with received tax breaks to establishing transparent financial assistance programs.

Through engaging stories and stirring findings, Sanders nudges us all to reflect: Are we, as a society, willing to stand by as entities morph mechanisms of public benefit into strategies for financial gain?

Here’s hoping the spotlight Sanders has thrust upon these practices ignites a dialogue that transverses from the Senate floor to every household, prompting us to rethink and reshape the contours of healthcare practices and policies in the U.S.