Congress Questions Abusive Tax Breaks for Hospital Giants

Large nonprofit hospital systems are drawing the scrutiny they have long avoided. The U.S. House Ways and Means Committee, led by Chairman Jason Smith, is continuing its oversight of hospital affordability, tax-exempt hospital networks, and the federal policies that have allowed major systems to expand while families face higher medical bills.

The committee’s work is overdue. Hospital spending has become one of the largest cost pressures in American health care, and many of the biggest nonprofit systems now operate more like protected commercial enterprises than charitable institutions.

Hospital Prices Face New Scrutiny

Chairman Smith has framed the issue in direct terms, describing some large nonprofit hospital systems as “hedge funds with hospital beds.” During the committee’s recent hearing with hospital executives, members examined rising prices, site-neutral payment, Form 990 transparency, physician-owned hospitals, and other policies tied to competition and affordability.

Rep. Beth Van Duyne used the hearing to highlight Washington’s restrictions on physician-owned hospitals. Those restrictions limit the expansion of facilities that can offer high-quality care at lower cost, reducing competition in a sector that badly needs it.

Federal Policy Helped Build the Problem

Paragon Health Institute’s recent paper, “The Hospital Cost Crisis,” reinforces the case for congressional oversight. The paper explains how federal policy has encouraged consolidation, weakened competition, and inflated prices through payment rules, 340B, Medicaid provider taxes, and other government-created advantages.

Chairman Smith has also pointed to rural-designation loopholes that allow large systems to access benefits intended for small and underserved rural communities. His example was New York-Presbyterian, where multiple campuses are classified in ways that qualify for rural benefits despite operating in Manhattan. As Smith put it, “There aren’t any farms on East 68th Street.”

Concern Extends Across the Policy Spectrum

The growing scrutiny is not limited to one side of the debate. Steve Forbes praised Chairman Smith’s focus on hospital prices and warned that Washington can no longer ignore the issue. Stephen Moore of the Committee to Unleash Prosperity pointed to hospital spending as a leading driver of recent health care cost growth, with direct consequences for family budgets.

Scott Hodge has documented the tax-policy side of the problem. Nonprofit hospitals now represent a $1.3 trillion industry and generated nearly $45 billion in tax-free profits in 2023. Marc Goldwein of the Committee for a Responsible Federal Budget has outlined options to bring down hospital costs, while Families USA has warned that large health systems often charge commercial patients about triple Medicare rates for the same care.

CFE Takeaway

Large nonprofit hospital systems should not receive open-ended tax advantages while behaving like commercial giants, exploiting federal loopholes, and pushing costs higher for families. Congress should keep pressing for transparency, competition, site-neutral payment, physician-owned hospital reform, and a serious review of nonprofit hospital tax benefits.

Scarce tax dollars have better uses than subsidizing hospital empires. Washington should protect taxpayers, restore competition, and put families ahead of politically protected hospital networks.