When you receive care at a non-profit hospital, you might assume that institution operates as a true charity—foregoing taxes in exchange for serving the community. You would be wrong.
The IRS currently allows hospitals to claim tax-exempt status while meeting only vague “community benefit” standards that can be manipulated to serve institutional rather than charitable purposes. Meanwhile, you and every other taxpayer subsidize these organizations through federal, state, and local tax breaks, below-market bond financing, and access to programs like the 340B prescription drug discount initiative—benefits worth billions of dollars annually.
The stakes are substantial. America’s 10 largest non-profit hospital systems reported combined operating revenues exceeding $350 billion in 2024, with annual growth rates of 10.6% — numbers that resemble Fortune 500 corporations, not charities. Yet these institutions continue enjoying tax advantages that force you to shoulder a heavier tax burden while they accumulate wealth.
The solution requires three concrete reforms to IRS oversight: mandatory annual disclosure of all tax advantages received, regular auditing to verify charitable activities justify tax exemptions, and revocation of tax-exempt status for hospitals that abuse federal programs designed to help underserved communities.
The IRS requires tax-exempt hospitals to meet two standards: conduct community health needs assessments every three years, maintain financial assistance policies, limit charges for qualifying patients, avoid extraordinary billing, and meet a “community benefit standard” showing they promote health for a broad community.
These requirements represent a foundation, but the community benefit standard remains dangerously elastic. Hospitals can claim they meet this standard through activities that serve political or institutional purposes rather than direct patient care—all while enjoying tax advantages that shift their burden onto individual taxpayers and small businesses.
Last year, a Senate report revealed Bon Secours Mercy Health, a tax-exempt group, took over $276 million by buying drugs for a Richmond hospital via the 340B program and reselling them at suburban hospitals. This scheme diverted benefits meant for underserved areas to wealthier regions, despite the organization’s charitable claims.
This represents not an isolated incident but a systematic pattern. When the country’s largest non-profit hospital system reports $116 billion in operating revenue while limiting charity care and spending heavily on overhead, the gap between charitable mission and institutional behavior becomes impossible to ignore.
Americans respond generously to genuine needs, like when the U.S. government committed to spend $3.4 billion to help survivors and begin rebuilding the country. Of course, it isn’t just the government that provides help. In just the 10 days after the earthquake, Americans used cell phones to text more than $30 million to the Haitian relief efforts.
This generosity stems from understanding that charities earn tax benefits by serving others, not themselves. When charities misuse funds or neglect their mission, Americans expect loss of tax privileges.
The IRS estimates that about half of private hospitals claim charitable status but behave like profit-driven firms. The federal government possesses the tools to address this corruption without creating new bureaucracy. The solution builds on existing reporting infrastructure that hospitals already navigate.
First, require annual Form 990 filings disclosing all tax advantages like federal and state tax breaks, below-market bonds, 340B program profits, and charitable contributions. Transparency helps community and donors assess if the hospital justifies its tax exemption status.
Second, implement regular IRS auditing to verify that tax-exempt organizations continue meriting their privileged position. These audits would examine whether reported community benefits represent genuine charitable activity or accounting manipulation.
Third, establish meaningful consequences for abuse. Hospitals that misuse programs like 340B—designed to help vulnerable populations—should face immediate revocation of tax-exempt status. The privilege of avoiding taxes carries the responsibility of serving the public good.
These organizations already maintain sophisticated compliance operations; implementing rigorous reporting requirements would not impose undue burden. It would, however, illuminate for taxpayers whether institutions claiming charitable status actually behave charitably.
Tax-exempt status is a compact between charities and society, where society forgoes tax revenue in exchange for public-good services. When hospitals claim charitable status but amass wealth, limit aid, and game programs, they break this pact—making taxpayers subsidize them while community benefits decline.
The Trump administration can restore accountability through clear IRS action. Americans are generous, but fairness requires organizations with tax advantages to prove they deserve them. It’s time to ensure ‘non-profit’ hospitals serve communities instead of exploiting them.
Leif Larson is a noted strategist with 20 years of experience in PR, public affairs and politics. He has contributed to the success of prominent political, corporate and advocacy groups across the country throughout his career.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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