Close the Big Hospital Tax Loophole

Nonprofit hospitals receive generous tax breaks. Many are no longer acting like charities.

A new National Review op-ed by Ryan Ellis makes the case clearly: Congress should close the big hospital tax loophole that allows large, highly profitable hospital systems to avoid taxes while providing limited charity care.

Federal law grants nonprofit hospitals tax-exempt status in exchange for providing meaningful community benefits. That status is supposed to reflect real charitable activity. In practice, some large hospital systems operate more like corporate health conglomerates while continuing to enjoy full tax exemption.

Tax exemption is a policy choice. When that choice is abused, taxpayers and patients pay the price.

What the Loophole Looks Like

Under current law, nonprofit hospitals are exempt from federal income tax and often from state and local taxes as well. They also benefit from tax-deductible charitable contributions and access to tax-exempt bond financing.

In return, they are expected to provide community benefits, including charity care.

The problem is that the standard is vague and enforcement is weak. Some large hospital systems report minimal charity care relative to their size while still claiming the full benefits of nonprofit status. At the same time, patients face aggressive billing practices, high facility fees, and limited price transparency.

This creates a distorted system where large institutions enjoy government-granted advantages while operating with limited accountability.

Why Reform Matters

Health care affordability remains a top concern for working families. When powerful hospital systems operate with tax advantages that no longer match their charitable output, it raises serious policy questions.

Closing the loophole would not punish legitimate charities. It would restore integrity to the tax code.

Congress has the authority to clarify what qualifies as sufficient community benefit. Lawmakers can set measurable standards for charity care and transparency. They can ensure that tax exemption reflects actual public service, not just corporate structure.

This is not an attack on nonprofit health care. It is a call for accountability.

A tax exemption should be earned.

CFE Takeaway

Tax exemptions exist to serve the public, not to shield large institutions from accountability.

Congress should close the big hospital tax loophole and ensure that nonprofit status reflects real charitable work. The tax code should reflect clear standards, fair treatment, and benefits tied to genuine public service.