Nonprofit hospitals have been caught doing some surprising things, given how they are supposed to serve the public good in exchange for being exempt from federal, state and local taxes — exemptions that added up to $28 billion in 2020.

Detailed media reports show them hounding poor patients for money, cutting nurse staffing too aggressively and giving preferential treatment to the rich over the poor. Nurses and other workers recently resorted to strikes to improve workplace safety at Kaiser Permanente and the Robert Wood Johnson University Hospital in New Brunswick, N.J.

That’s not the end of it. Nonprofit executives have embarked on an acquisition spree, assembling huge systems of hospitals and physician practices to raise prices and increase profits. Ample evidence indicates that the growth of these giant systems makes health care less affordable for patients, families and businesses.

Over the past year, a new hospital strategy has come to the fore, the cross-market merger. In the past, most mergers and acquisitions involved hospitals or physician groups in the same geographic area. Now health care systems are reaching far and wide to find other hospitals to acquire. This is exemplified by the California-based Kaiser’s acquisition of Geisinger Health in Pennsylvania announced in April. Since then, hospitals in Missouri, Texas and New Mexico were involved in two other cross-market mergers. In another example, Advocate Aurora Health’s merger late last year with Atrium Health created a juggernaut with 67 hospitals strung across six states, from Wisconsin to North Carolina. We are witnessing the advent of the new American megahospital system.

Calling these hospitals nonprofits can be confusing. It doesn’t mean they can’t make money. What it means is that they are considered charities by the Internal Revenue Service (as opposed to being owned by investors, like for-profit hospitals). And in return for their tax exemptions, these institutions are supposed to invest the money that would have gone to taxes into their communities by lowering health care costs, providing community health services and free care to those unable to afford it and conducting research. These hospitals proliferated after federal tax rules about 50 years ago made it easier to qualify for tax exemptions. They now make up more than half of the nation’s hospitals.

So why are nonprofit hospitals behaving in ways that seem to focus more on dollars than patients? Hospitals are undergoing a reckoning about their role in the national health system. The United States will require fewer hospital beds in the future if current trends continue. This looming likelihood — plus financial challenges from the pandemic, a severe worker shortage, rising inflation and stock market volatility — has put nonprofit hospitals in survival mode.

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