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What Is A Private "Nonprofit" Hospital?

In a recent letter to the editor of the New York Times, a physician at Bellevue Hospital and clinical professor of medicine at NYU, Danielle Ofri, addressed this issue.

Hospitals in the US fall into three financial categories: 1) private hospitals (responsible to shareholders); 2) public hospitals (owned by governmental entities that are obligated to provide care to the underserved); and 3) private nonprofit hospitals.More than half of our hospitals today are "private nonprofit hospitals."

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This does not mean that they do not make any money. Very well-known hospitals such as Mayo, John Hopkins and Banner are examples of private nonprofit hospitals. In this context, private nonprofit hospitals receive tax benefits from federal and local sources in exchange for providing a community benefit.

Private nonprofit hospitals are no longer charity hospitals. There is wide discretion in how much community benefit is received for the ability to waive payment of property tax, payroll tax, sales tax. These hospitals also are exempt from paying for services such as garbage collection, city fire and police, etc. Some private nonprofit hospitals have argued that by accepting Medicaid insurance, the difference between that payment and their calculated cost for the service was a community benefit and the difference should be written off.

Despite multi-million-dollar yearly profits, under the current tax exempt status as a private nonprofit, conglomerate hospitals are receiving huge tax exceptions. In many communities, the benefits to the hospital have far outweighed the benefits to the community. Lawsuits have been filed in Pennsylvania and New Jersey to revoke the tax advantages. Perhaps other states will soon follow. 

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