When my parents arrived in the United States from Cuba, they brought almost nothing with them except a hard-earned distrust of institutions that take the public’s money in the name of the public good. Castro’s Cuba was full of them. I still know one when I see it.
American nonprofit hospitals warrant that same scrutiny. They collect roughly $37.4 billion each year in federal, state, and local tax breaks. In exchange, they are expected to provide free care to qualified patients and to invest in the health of the neighborhoods they serve. Many of them unfortunately don’t.
The Lown Institute studied 1,800 nonprofit hospitals last year. Fifty-four percent took more from taxpayers than they gave back, for a combined shortfall of $11.5 billion. Tennessee’s nonprofit hospitals collect $415 million a year in tax exemptions, and twenty-nine percent of them fail to return that value to their communities. Vanderbilt University Medical Center (VUMC) alone ran a $25 million annual gap between what it received in tax breaks and what it invested in the community. VUMC is not a struggling institution. It reported $7.6 billion in operating revenue and $320.8 million in net income in fiscal 2024, while paying its CEO more than $7.6 million a year. Bristol Regional Medical Center in the northeast is on the same list. The statewide shortfall totals $53 million a year.
That is a serious number. In Tennessee, $53 million would erase the medical debt of 80,000 families or hire 600 more registered nurses. It would buy two million doses of naloxone in a state where fentanyl deaths surged between 2017 and 2021. Instead the money stays on hospital balance sheets. State law does not require these hospitals to explain where it went. Tennessee has no community benefit reporting standard and no way to enforce a nonprofit hospital’s charitable obligations. We just take the industry’s word.
See the notorious 340B prescription drug pricing program as another example. It’s a massive federal program with little to no accountability, and nonprofit hospitals across the country – including right here in Tennessee – are regularly abusing the program. The discounts should only be claimed on poor and uninsured patients and those discounts should go towards each patient’s care. However, oftentimes, those discounts are unaccountable and go to items outside of patient care. Nonprofit hospitals should have no issue with reforms that ensure the discount goes to patient care instead of an unaccountable slush fund.
Washington has finally started asking harder questions. CMS Administrator Dr. Mehmet Oz calls the fight against healthcare waste, fraud, and abuse his agency’s “topic number one.”
His team has issued warnings to more than 500 hospitals hiding their prices from patients and pressed every governor to purge fraudulent providers from Medicaid rolls. The same accountability belongs on hospital systems collecting community benefit exemptions while shortchanging the communities that funded them. Dr. Oz’s team should keep pulling the thread.
For nearly twenty years I worked for a prison ministry non-profit that mentored inmates coming out of prison. Nationally, on average, over three years between 28% and 39% will be reincarcerated, while roughly 68% to 75% of former inmates will be arrested for a new crime in the next three years. However, the program I worked for had a recidivism’s rate below 15 percent. Every one of those men used to cost the state money. Now, the super majority of those former inmates are productive members of society who are working and paying taxes instead – living productive and fruitful lives reunited with their families.
That is what a nonprofit looks like when it means what it says. Running a small ministry teaches you the deal: if the taxpayer gives you something, you owe results. It also teaches you to spot the organizations using the label as cover.
Tennessee’s biggest hospital systems have spent the last decade buying up community hospitals and physician practices. They are now some of the largest businesses in the state. When one of them collects tens of millions in tax breaks and returns less in charity care, it is using the nonprofit label as cover. The Tennesseans getting shorted are the same ones who paid for the exemption to begin with.
Tennessee lawmakers should require nonprofit hospitals to publish community benefit spending in detail and set a real floor for charity care – especially those who are 340B hospitals. Transparency and accountability are key.
Congress should pass Congresswoman Victoria Spartz’s Holding Nonprofit Hospitals Accountable Act, which would put an enforceable community benefit standard into federal tax law. Dr. Oz’s CMS should treat community benefit accountability as another front in the fight it is already waging.
A tax exemption is a promise the public makes to institutions doing genuine charitable work. Hospital systems that break that promise should not continue to reap the benefits. The families walking into Tennessee’s emergency rooms are not asking for a favor. They already paid.
– – –
Raul Lopez is the Chairman of the Board and Co-Founder of Latinos for Tennessee.Â
