Nonprofit hospitals weathered a broadside of criticism on their use of tax benefits and exploitation of “anticompetitive” regulations and policies during a Tuesday afternoon House Ways and Means Oversight Subcommittee hearing.
Testimonies given to the Republican-led committee covered a broad swath of grievances with limited or conditional support for tax-exempt hospitals.
Some witnesses hailing from organizations advocating against “gender identity politics” and “wokeism” in healthcare, railed against nonprofits’ spending on areas like brand marketing, environmental sustainability and diversity, equity and inclusion. Though they deferred on questions of specific economic policy, these speakers asserted that nonprofit hospitals’ “mission creep” goes well beyond clinical activities and should not be subsidized by taxpayers.
“This misprioritization of politics over patients distracts hospitals from their core mission and can compromise the quality of treatment and increase costs, which can put consumers in serious physical and financial danger,” said William Hild, executive director of Consumers’ Research.
Academics specializing in economics and health policy research, meanwhile, highlighted for the subcommittee their work estimating over $37 billion in annual tax-exemption benefits and urban hospitals double-dipping into rural hospital designations.
These witnesses pointed to market trends like consolidation as a driver of high healthcare costs and warned of well-resourced nonprofit systems exploiting mandatory requirements that smaller, rural facilities may struggle with. More broadly, they told lawmakers to consider fixes that increase transparency and promote more competition with other for-profit hospitals as well as nonhospital entities.
“Tax-exempt status was granted to them based on the situation more than a century ago, when hospitals were solely staffed by volunteers to care for the poor,” said Ge Bai, Ph.D., professor of health, policy and management at the Johns Hopkins Bloomberg School of Public Health. “It does not reflect the [current] situation, and it gives nonprofits an advantage and fuels consolidation in the hospital market.”
Both of these groups of witnesses were in agreement that the current community benefit reporting requirements for nonprofit hospitals are insufficient. Nonprofits don’t have a clear definition of a community benefit under statute, they said, and no requirements to spell out specific spending items in mandatory IRS forms means there’s limited measurable evidence of organizations’ positive outcomes for their communities.
“For example, many hospitals are part of large conglomerates, mega systems, which often report a Schedule H [Form 990] at the system level, which does not allow for auditors, researchers and policymakers to understand community benefit reporting at the individual hospital level,” Christopher Whaley, Ph.D., associate director of Brown University’s Center of Advancing Health Policy through Research, said.
The full-throated defense of nonprofit hospitals came from Jill Horwitz, Ph.D., a professor at the Northwestern Feinberg School of Medicine and at the Northwestern Pritzker School of Law.
She noted that nonprofits make up the majority of the country’s care and more often provide extensive, nonprofitable service lines than their for-profit peers. She also warned many are under financial distress with slim or negative operating margins and that new policies pulling their tax-exemption status, reducing funding or imposing new burdens could lead to shutdowns or outside acquisitions, including scoop-ups by private-equity-backed systems that have historically undercut sustainable care.
“Nonprofit hospitals provide vital and sustainable services in communities, and the services they provide are more likely than for-profits to meet important social needs,” she said. “In today’s market and demographic environment, policymakers ought to focus on ways to strengthen, and not weaken, nonprofits in the American hospital system.”
Horwitz’s message was largely supported by the subcommittee’s Democrats, who roundly condemned new economic pressures on nonprofit providers as the sector is already staring down the barrel of the One Big Beautiful Bill Act’s Medicaid cuts and expiring Affordable Care Act insurance premium subsidies. Some mused that the witnesses’ calls for stricter community benefit reporting and enforcement will likely be more difficult amid the current administration’s “gutting” of the IRS’ workforce.
“During a hearing on the same topic last Congress … the Government Accountability Office noted that the IRS has not revoked a hospital’s tax-exempt status for failing to provide sufficient community benefits in the last 10 years,” Suzan DelBene, D-Wash., said.
The subcommittee’s Republicans, who led the questioning, sought to walk a delicate line on the issues. Several pointed to the uphill battle rural nonprofits face keeping the lights on and said they were interested in policy recommendations that preserve these hospitals by fending off consolidation and preventing larger urban systems from poaching limited resources.
Others were receptive to Bai’s big-picture calls to pull back regulations and subsidies to increase competition, in which she argued that external pressures will be necessary to force larger systems to focus their resources and cut spending. Almost across the board, the Republicans agreed with the accusations of misdirected spending and backed increased transparency and reporting requirements as a fix.
“Patients with financial insecurity are still being asked to jump through extensive hoops—providing bank statements, loan records, detailed household budgets on short notice—just to find out if they qualify for financial aid,” Beth Van Duyne, R-Texas, said. “At the same time, these nonprofit hospitals continue to face only vague and limited requirements from the IRS to maintain their privileged tax status. I think my Democrat colleagues would agree with me—that imbalance remains troubling, and if anything the stories and reporting we’ve seen since this have underscored how this system too often favors large institutions at the expense of patients.”
The American Hospital Association (AHA), in a statement submitted to the subcommittee, pointed to recent data it released outlining nearly $150 billion in total community benefit reported by nonprofit hospitals to the IRS in 2022—a tally the industry’s critics typically pan for including spending on areas like medical research and training for which hospitals are often compensated.
The AHA’s statement argued that keeping those requirements flexible is essential and that limiting the measurements to direct financial assistance misses hospitals’ work in tailoring their expenditures to the needs of their communities.
“Any suggestion that the IRS should both define and evaluate community benefit clearly misses the point,” the hospital lobby wrote. “Community benefit can only be fairly judged by those in the community for which the benefits accrue.”