In theory, nonprofit hospitals exist to serve the public good. In practice, the reality is increasingly complicated.
Across the United States—and increasingly in Washington State—nonprofit hospitals operate as sophisticated healthcare corporations. They expand aggressively, acquire competitors, build new specialty facilities, and compete fiercely for privately insured patients.
Yet these same institutions enjoy extraordinary public privileges. Nonprofit hospitals are exempt from federal income taxes, state taxes, and local property taxes. They can issue tax-exempt bonds and receive tax-deductible charitable donations. They also receive billions of dollars annually through Medicare and Medicaid payments.
These benefits represent one of the largest indirect public subsidies in the American healthcare system. In exchange, nonprofit hospitals are expected to provide measurable benefits to the communities that support them—charity care for the poor, investments in community health, and services for underserved populations.
That arrangement—often called the nonprofit hospital social contract—has guided U.S. health policy for decades. But policymakers increasingly ask a simple question: Are nonprofit hospitals still fulfilling their end of the bargain?
Washington State offers a revealing case study. The state has some of the strongest patient protections and charity-care laws in the country. Yet its healthcare system is dominated by large nonprofit hospital networks whose financial practices increasingly resemble those of corporate healthcare conglomerates.
The tension between nonprofit mission and corporate behavior has become impossible to ignore. Restoring accountability does not require dismantling nonprofit medicine. But it does require reaffirming the principle that originally justified nonprofit status: Public subsidy must produce measurable public benefit.
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