What is the problem with nonprofit hospitals?

The obvious problem is that they don’t pay taxes. This is not a trivial point. In 2002 the tax exemptions for nonprofit hospitals was approximately 12 billion dollars, and in that same year the estimated cost of providing medical care to the entire uninsured population was 60 billion. That means that we could care for 20% of the uninsured population by simply taxing nonprofit hospitals.

The larger issue is that the nonprofit designation of many hospitals seems to be a betrayal of the intent of the law. We do not tax nonprofit organizations because they provide charitable services. But is this true of nonprofit hospitals. When compared to for profit hospitals, nonprofits were less likely to care for Medicaid patients, and no more likely to provide free care to indigent populations. Moreover, nonprofit hospitals were more likely to be located in more affluent areas and hence have access to better paying patients.

Furthermore, these “nonprofit” hospitals are actually very profitable. The average CEO compensation was over 2 million dollars and in some instances over ten million. UPMC had 30 employees (most executives) making over one million dollars.

We should all be asking our lawmakers why the “nonprofit” hospital industry is generating huge executive paychecks and not paying taxes when we still have people who cant afford insurance?

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