Non-profit Hospitals are Gaming the System

Did you know some of the biggest nonprofit hospital systems in the United States own for-profit businesses? In fact, they have become wealthy diversified businesses, and they are some of the biggest businesses in the United States.  There are financial benefits to maintaining nonprofit status when it comes to taxes because they get more of a break. They can get preferred rates on bonds and get other financial advantages over their for-profit competitors.  They turn their parking garages and laundry facilities into for-profit subsidiaries.  They buy or start doctor groups and imaging and surgery centers that are for-profit.  They buy for-profit insurance companies, and for-profit hospitals in other countries.  Owning other businesses that are “for profit” allows them to pay their CEO’s and other executives substantially more in salaries than most other non-profits.  It has been reported that 7 out of the top 10 most highly paid nonprofit CEOs run hospitals.  These people are paid millions, and sometimes tens of millions of dollars each year.  They use these tricks and lobbying to keep their nonprofit status, all while still running their side for-profit businesses.

 

The rules about how charitable a nonprofit hospital must be to keep its nonprofit status are just not as clear as they should be, and the IRS doesn’t always investigate these things carefully. These huge organizations should be paying taxes just like other businesses, and it’s time for legislatures and the IRS to wake up.