You’re paying ‘nonprofit’ hospitals twice. First in tax breaks, then in 250% markups

While the skyrocketing cost of healthcare seems to be in the news most days, very few talking heads are discussing one of its biggest drivers: hospital prices. Families bear the costs of hospital prices in insurance premiums, deductibles, and medical debt as employers struggle to manage the rising cost of coverage, and taxpayers fund the growing public expense of Medicare and Medicaid.Nonprofit hospitals enjoy their tax breaks in exchange for providing charitable care to the most vulnerable in our communities. In light of these benefits that stem from public trust, hospitals should be accountable to basic reporting and transparency standards.To take my home state of Texas as an example, a recent report by the Center for Medicine in the Public Interest on our state’s nonprofit hospitals provided a useful case study. Large hospital systems receive substantial tax advantages as they expand through acquisitions, invest in lucrative services, pay top executives millions, and make it difficult for patients to understand prices in advance. The report cites that 42% of the Texas nonprofit hospitals reviewed provided less measurable community investment than the value of their tax benefits. That discrepancy raises the question of whether taxpayers are getting value for the support they provide.Leaving Texas aside for the moment, the hospital waste, fraud, and abuse problem is national. Hospital care accounted for about 31% of U.S. health spending in 2024, or $1.6 trillion, and RAND researchers found that in 2022, employers and private insurers paid hospitals an average of 254% of what Medicare would have paid for the same services. Those prices vary widely, and higher bills do not automatically mean better care.Nonprofit hospitals deserve special scrutiny because their tax exemption rests on a promise of public benefit. KFF estimated that nonprofit hospitals received about $28 billion in tax benefits in 2020, compared with an estimated $16 billion in charity care costs. Charity care is only one part of community benefit, so those figures do not settle the question on their own. They do show why the public deserves better reporting and accountability.The CMPI report points to several practices that deserve closer scrutiny across the country: opaque pricing, aggressive consolidation, limited access for some Medicaid patients, and a growing focus on commercially insured patients. A hospital system may say its strong commercial revenue helps support services that lose money, which might be true, but when hospital mergers give a system more power to demand higher rates and patients and employers have little ability to compare prices or choose another provider, the system’s negotiating strength becomes a cost borne by everyone else.Price transparency should help correct that imbalance, but a federal watchdog found that from 2021 through 2023, CMS initiated enforcement actions against 74% of the hospitals it reviewed for noncompliance with federal price transparency rules. Even posted data can be difficult for patients to use, and a price filing is not meaningful transparency if it is intentionally opaque to the point that a family cannot determine what a common procedure is likely to cost before receiving care.Congress and federal agencies should set clearer expectations. Hospitals should publish accurate, usable prices and face meaningful consequences when they fail to do so. The IRS and states should require consistent, facility-level reporting of tax benefits and community contributions, then apply objective standards to determine whether nonprofit hospitals are meeting their obligations. Regulators should also take a harder look at consolidation when it reduces competition without clear benefits for patients.ROBIN HOOD IN REVERSE: HOW BIG HOSPITALS USE POVERTY SUBSIDIES TO PROFIT IN WEALTHY SUBURBSThese steps will protect patients and preserve public confidence in institutions that receive public support. Hospitals need financial strength to invest in facilities, technology, and skilled staff, but financial success cannot be the only measure of whether a tax-exempt institution is fulfilling its mission.The bargain is straightforward: Taxpayers provide special treatment because nonprofit hospitals are supposed to return special value to their communities. Across Texas and the country, it is time to make that value visible, measurable, and real.Joe Barton represented Texas’s 6th congressional district in the U.S. House of Representatives, where he served as the Chair of the Committee on Energy and Commerce.