Introduction
The American healthcare system faces a growing crisis in quality and affordability. In a recent Washington Post piece, Elisabeth Rosenthal asks whether nonprofit hospitals are helping ease this crisis — or making it worse. Her reporting shows that many of these institutions operate less like charities and more like corporations. So the question must be asked: are nonprofit hospitals part of the solution, or part of the problem?
The Evolution of Nonprofit Hospitals
Nonprofit hospitals once served communities that lacked reliable access to medical care. Their tax-exempt status came with an expectation: put the public good ahead of profit. Over time, many of these hospitals adopted business strategies more common to large corporations. Revenue growth, aggressive expansion, and brand dominance began to shape their missions.
Nonprofits Engaging in Profitable Ventures
There are countless examples of nonprofit hospitals engaging in efforts that seem far removed from charitable care. Some nonprofit hospitals now work with for-profit insurers. Others channel funds into venture capital, backing startups that have little connection to healthcare. One hospital even partnered with a luxury wellness spa charging thousands per night. These activities raise an obvious question: do these moves match the purpose of serving the public?
Beyond the financial upside, these ventures bring ethical concerns. Nonprofit hospitals enjoy tax breaks meant to support community benefit. When they focus on profitable side projects, their original mission can slip into the background.
Nonprofit hospitals have gone even further by buying for-profit assets: doctors’ groups, imaging centers, and surgery centers. We can even point to examples of nonprofit hospitals building for-profit facilities overseas, from Italy to Kazakhstan and London. Legally, this blurs lines. A nonprofit organization expanding into for-profit territory tests the limits of its tax-exempt status. Yet so far, regulators and the IRS have largely accepted these moves.
So when these same nonprofit hospitals ask the community to help them out by donating socks, funds, or other drives – how can we feel confident these donations are truly going to a good cause?
The Rise of CEO Compensation
You might also furrow your brow at the fundraising drives when you take into consideration the average hospital CEO’s salary. Many nonprofit hospitals defend high executive salaries by pointing to the complexity of running large health systems. Yet the gap between patient experience and executive pay keeps growing. The average salary of a nonprofit hospital CEO is roughly $1.3 million and reaches over $3.4 million when we look at larger hospital systems. For context, these numbers have climbed by over 30% in the past decade — much faster than the wage growth for nurses, primary care physicians, or other frontline staff.
This shift matters for more than appearances. High compensation levels reflect a culture where financial success becomes a top measure of performance. Funding that could support expanded charity care, community health programs, or improved nurse staffing are instead directed toward executive bonuses and perks. For patients, the impact shows up in longer wait times, reduced access to specialists, and rising out-of-pocket costs. At the same time, patients are told these institutions operate for the public good.
The message this sends can undermine trust. When hospital leaders are paid like private-sector CEOs, yet patients still face surprise bills and overcrowded emergency rooms, patients have to question whether the nonprofit status truly protects them.
The Steward Health System Crisis
The collapse of Steward Health System in Massachusetts offers a stark illustration of what happens when financial engineering displaces patient care as a hospital system’s guiding principle. Originally founded as a Catholic nonprofit serving working-class communities, Steward transitioned to for-profit ownership in 2010. It promised cost savings and operational efficiency while preserving care quality. What unfolded instead was a slow-motion unraveling with direct consequences for patients, providers, and entire communities.
Steward’s model was built on an aggressive strategy: buy struggling community hospitals, centralize operations, and extract value. But this strategy relied heavily on financial tools — including sale-leaseback deals and leveraged debt — that prioritized short-term liquidity over long-term sustainability. Steward sold its hospital real estate to a private equity firm, Medical Properties Trust (MPT), then leased it back. This move created immediate cash flow — but locked the system into high lease payments, draining operating budgets meant for staff, equipment, and patient services.
As Steward’s financial situation worsened, the cracks became impossible to ignore. Hospitals under its umbrella experienced:
- Critical supply shortages, including missing or delayed medications and surgical tools;
- Unsafe staffing levels, with nurses and doctors stretched dangerously thin;
- Delayed maintenance, including heating failures in the middle of New England winters;
- Vendor nonpayment, leaving basic operational contracts — from linen services to medical waste disposal — in limbo.
These weren’t isolated issues. They signaled systemic rot at the core of the organization. For patients, the effects were immediate and painful: canceled surgeries, longer emergency room waits, and referrals to distant facilities. For clinicians, the chaos created moral distress and burnout, pushing many to leave — and further straining already short-staffed hospitals.
Entire communities bore the brunt. In places like Taunton, Quincy, and Fall River — cities with limited alternative healthcare access — Steward’s instability meant residents were suddenly forced to travel much farther for maternity care, emergency services, or specialist visits. What had once been a local lifeline turned into a hollowed-out shell.
Steward began with a mission to serve, but ended up as a case study in how mission drift — combined with opaque finances and unchecked leadership — can devastate public health infrastructure.
The Implications for the Future of Healthcare
Patients count on nonprofit hospitals to take care of the community. When these institutions invest in overseas ventures, luxury partnerships, and for-profit acquisitions, public trust erodes. The healthcare crisis remains unresolved — and in some areas, worsens.
Rather than accept this trend, policymakers and healthcare leaders could pursue reforms that keep patient care at the center. Greater transparency, stronger oversight, and fair regulation may help shift focus back to what matters most: affordable, high-quality care.
Conclusion
Nonprofit hospitals were created to put patients before profits. Today, many follow a different playbook, adopting corporate strategies that often work against their founding mission. Tax-exempt status should mean real commitment to community health, not just a different business model. To truly fix the quality of care crisis, the healthcare system needs accountability, honesty, and reforms that keep patients — not profits — at its heart.
