NCPA - National Center for Policy Analysis

NONPROFIT HOSPITALS, ONCE FOR THE POOR, STRIKE IT RICH

June 5, 2008

Nonprofit hospitals, originally set up to serve the poor, have transformed themselves into profit machines.  As the money rolls in, the large tax breaks they receive are drawing fire, says the Wall Street Journal.

Riding gains from investment portfolios and enjoying the pricing power that came from a decade of mergers, many nonprofit hospitals have seen earnings soar in recent years:

  • Nonprofit hospitals account for about 60 percent of the more than 3,400 hospitals in the United States; the rest are either for-profit or government-owned.
  • The combined net income of the 50 largest nonprofit hospitals jumped nearly eight-fold to $4.27 billion between 2001 and 2006, according to a Wall Street Journal analysis of data from the American Hospital Directory (AHD).
  • No fewer than 25 nonprofit hospitals or hospital systems now earn more than $250 million a year.
  • One nonprofit hospital system, Ascension Health, has a treasure chest of $7.4 billion -- more than many large, publicly traded companies.
  • Nonprofits, which account for a majority of U.S. hospitals, are faring even better than their for-profit counterparts: 77 percent of the 2,033 U.S. nonprofit hospitals are in the black, while just 61 percent of for-profit hospitals are profitable, according to the AHD data.

The growing gap between many nonprofit hospitals' wealth and what they give back to their communities is raising questions about the billions of dollars in tax exemptions they receive.

In a report issued in December 2006, the Congressional Budget Office estimated nonprofit hospitals receive $12.6 billion in annual tax exemptions, on top of the $32 billion in federal, state and local subsidies the hospital industry as a whole receives each year.

Source: John Carreyrou, "Nonprofit Hospitals, Once for the Poor, Strike it Rich," Wall Street Journal, April 4, 2008.

 

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