Tax-Exempt Hospitals Receive Billions in Tax Breaks. Here's How Much Charity Care They Actually Provide.

Nonprofit hospitals in the United States receive an estimated $28 billion per year in tax breaks. They pay no federal income tax. They pay no state or local property taxes. Donations to them are tax-deductible. In exchange for these benefits, which are subsidized by every taxpaying individual and business in their communities, they are expected to provide community benefit: services and programs that justify their privileged tax status.

This arrangement has existed for decades, largely unexamined. The reasoning seems intuitive: hospitals serve the sick, the sick include people who can't pay, therefore hospitals that treat everyone deserve tax-exempt status. For much of American history, that logic held. Nonprofit hospitals were community institutions that operated on thin margins, staffed by mission-driven leaders, and provided care to anyone who walked through the door regardless of ability to pay.

But the nonprofit hospital of 2026 is not the nonprofit hospital of 1966. Today's tax-exempt hospital systems are billion-dollar enterprises. They acquire physician practices, build outpatient surgery centers, invest in real estate, and compete directly with for-profit chains for profitable procedures. Their CEOs earn seven-figure compensation packages. Their marketing budgets rival consumer brands. And yet, they continue to receive the same tax exemptions as the community hospitals of a previous era.

We analyzed the IRS Form 990 Schedule H filings of 1,819 nonprofit hospital organizations operating 3,022 facilities for tax year 2023. Schedule H is the only IRS schedule filed exclusively by hospitals, and it requires disclosure of charity care, community benefit spending, financial assistance policies, and bad debt. Every number in this article comes from the hospitals' own filings, their own accountants, their own representations to the IRS. What those numbers reveal is a significant gap between what the public expects from tax-exempt hospitals and what the data shows they provide.

Nonprofit hospitals reported $278.8 billion in total community benefit in 2023. That number sounds massive, and it is. It represents roughly 7% of the median hospital's total costs. If you stopped reading here, you might conclude that nonprofit hospitals are providing extraordinary value to their communities in exchange for their tax exemptions.

But the $278.8 billion figure conceals a critical distinction: what hospitals count as "community benefit" and what most people think of as charity are very different things.

The dominant category, accounting for 62.2% of all reported community benefit, is unreimbursed Medicaid. This represents $173.4 billion: the gap between what Medicaid pays hospitals and what care costs. Every hospital that treats Medicaid patients faces this shortfall, including for-profit hospitals. It is a consequence of treating patients insured by a government program with below-market reimbursement rates, not a voluntary investment in community health.

Counting unreimbursed Medicaid as "community benefit" has drawn criticism from researchers and policymakers. The shortfall is real (hospitals do lose money on Medicaid patients), but it is a cost that arises from participating in the Medicaid program, not a voluntary charitable investment. For-profit hospitals face the same shortfall. Including it in the community benefit total means that two-thirds of the $278.8 billion reflects the economics of government reimbursement rates rather than deliberate decisions to invest in community health.

When you strip out unreimbursed Medicaid, the total drops to $105.4 billion. When you look at only the categories that represent deliberate charitable investment, including charity care, community health improvement, and cash contributions, the total is $24.6 billion. And when you isolate just charity care itself, it's $17.3 billion.

For context, the tax breaks these hospitals receive are estimated at $28 billion annually. The entire nonprofit hospital sector's charity care spending ($17.3 billion) is less than the estimated value of the tax exemptions they receive. This comparison is one reason policymakers have increasingly questioned whether the current community benefit framework adequately measures the return on those exemptions.

The 15 largest nonprofit hospital systems by community benefit reporting reveal the enormous concentration in the industry. Mass General Brigham tops the list with $5.4 billion in total community benefit across 14 facilities. Hackensack Meridian Health reports $4.2 billion at a 20% community benefit rate across 18 facilities. NY Presbyterian Hospital reports $3.7 billion at 21% from a single massive facility.

These are systems where community benefit rates are genuinely high (15%, 20%, even 21% of total costs). But it's important to understand what's driving those numbers. New York and New Jersey have among the highest Medicaid enrollment in the country. Academic medical centers like NYU Langone and Montefiore have large teaching programs that count toward community benefit. The high percentages reflect the payer mix and institutional structure of these specific hospitals, not necessarily a more generous institutional philosophy.

Then there's Kaiser Foundation Hospitals, the largest nonprofit hospital system in the country by facility count with 43 facilities. Kaiser reported $3.5 billion in community benefit, an enormous sum in absolute terms. But as a percentage of its total costs, that's only 4%. Four percent. For the largest nonprofit hospital operator in America. Kaiser's charity care component was $426 million, which sounds substantial until you realize Kaiser is one of the largest healthcare organizations in the world, with tens of billions in annual revenue.

The concentration at the top is worth emphasizing. The 39 largest systems, those with $5 billion or more in revenue, account for just 2% of all Schedule H filers. But they report 29% of all community benefit, totaling $81.1 billion. These are systems like Cleveland Clinic Foundation ($3.1 billion, 10%), UPMC Group ($2.9 billion, 6%), and Vanderbilt University Medical Center ($2.7 billion, 10%). The national community benefit statistics are overwhelmingly shaped by what happens at a few dozen massive hospital systems, while 1,509 single-facility hospitals, which are the community hospitals that serve most of rural and suburban America, report a combined $126.5 billion, less than twice what the top 39 systems report on their own.

The variation between systems of similar size is also striking. Among the top 15 hospitals by community benefit, the percentage ranges from 4% (Kaiser) to 21% (NYU Langone Hospitals and NY Presbyterian). That's a 5x difference among peer institutions. BJC Health System in Missouri reports 15% across 12 facilities with $307 million in charity care alone. Spectrum Health System in Michigan reports 5% across 21 facilities with $95 million in charity care. These are organizations operating in the same regulatory environment, filing the same IRS forms, and theoretically bound by the same community benefit expectations, yet producing wildly different results.

Among 685 nonprofit hospital CEOs with reported compensation in 2023, the median total compensation was $686,723. The 25th percentile, meaning one in four hospital CEOs earns less, was $333,977. The 75th percentile reached $1.56 million. At the very top, hospital executives earned well into the eight figures.

These figures are roughly double the median nonprofit CEO salary across all sectors. A CEO running a $5 million social services nonprofit might earn $120,000. A CEO running a $5 billion hospital system earns $2 million or more. The gap reflects the genuine difference in organizational complexity, but it also raises questions about the expectations that come with nonprofit status.

Hospital executives and their boards argue that these salaries reflect market realities. If a nonprofit hospital pays its CEO $500,000, the argument goes, that CEO will be recruited away by a for-profit system offering $2 million. The talent pool for hospital leadership is small, the job is demanding, and the consequences of poor leadership are measured in patient lives. There is real logic to this position.

The tension becomes clearer when you look at specific cases. Consider a hospital system where the CEO earns $3 million in total compensation (base salary, bonus, deferred compensation, and benefits) while the system reports $2.5 million in charity care. In dollar terms, the organization allocated more to a single executive's compensation than to free care for all qualifying patients during the entire year. Reasonable people can disagree about whether that balance is appropriate, but the numbers invite the question.

This is not an argument that hospital CEOs should work for free, or even for modest salaries. It is an observation that the gap between executive compensation and charitable output raises questions about how tax-exempt institutions allocate their resources, and whether the current balance reflects the intent behind the exemption.

It's also worth noting what hospital CEO compensation reflects about institutional incentives. Compensation packages are set by hospital boards, often with the guidance of compensation consultants who benchmark against peer institutions. The benchmarking process tends to push pay upward over time, since each board aims to pay at or above the median for their system's size. Charity care spending, by contrast, faces no equivalent upward pressure. There is no external benchmark pushing hospitals to provide more free care, and no market force creating competition around generosity. This structural difference in incentives helps explain why compensation has grown faster than charity care at many institutions.

If you live in Tennessee or New York, your local nonprofit hospitals report a median community benefit of 13% of total costs. If you live in Kentucky or North Dakota, the median is 2%. That's a 6.5x difference in how much hospitals give back to their communities, driven by a complex mix of state Medicaid programs, hospital size, academic medical center presence, and, perhaps most importantly, how actively state regulators oversee hospital community benefit practices.

New York stands out not just for its high percentage but for its sheer volume. The state's 124 Schedule H filers reported $34.6 billion in community benefit, which is 12.4% of the entire national total from a single state. This reflects New York's high Medicaid enrollment, its concentration of academic medical centers (NYU Langone, NY Presbyterian, Montefiore Medical Center), and its high cost of care. New Jersey follows a similar pattern, with 25 hospitals reporting $11.4 billion at a 12% median rate, driven in large part by Hackensack Meridian Health and RWJ Barnabas Health, two massive systems.

High-benefit states tend to have large academic medical centers with teaching and research missions, robust Medicaid programs, and higher costs of care. Tennessee is home to Vanderbilt University Medical Center. New Jersey is dominated by Hackensack Meridian Health and RWJ Barnabas Health. South Dakota's numbers are driven by Sanford Group Return, a multi-state system.

At the other end of the spectrum, the states with the lowest community benefit percentages show notably low rates. Kentucky's 41 hospitals report a median of just 2% of costs as community benefit. North Dakota's 27 hospitals also report 2%. Louisiana, with its complex healthcare landscape and high uninsured rates, manages only 3%. These are states where the need for charity care is often greatest, and where hospitals are providing the least.

There's a notable correlation between low community benefit and high bad debt. South Carolina, for example, reports a median community benefit of 4% but a median bad debt ratio of 10.1% of expenses. What this pattern suggests is that in these states, uncompensated care doesn't disappear. It just shifts from the hospital's charity ledger to patients' credit reports. Instead of proactively screening patients for financial assistance and providing free care, these hospitals treat patients, bill them, fail to collect, and write off the losses as bad debt. The cost of caring for the uninsured is the same either way, but the impact on patients is very different.

For the patient, the difference between charity care and bad debt is the difference between receiving a bill marked $0 and receiving a bill for $47,000 that goes to collections, damages their credit score, and may result in a lawsuit or wage garnishment. The hospital reports both as uncompensated care. But only one destroys a family's financial future.

The Affordable Care Act, passed in 2010, added Section 501(r) to the Internal Revenue Code, imposing new requirements on every tax-exempt hospital in the country. Every hospital must conduct a Community Health Needs Assessment (CHNA) every three years. Every hospital must establish a written financial assistance policy (FAP) outlining who qualifies for free or discounted care. Every hospital must publicize that policy to the community. And every hospital must make reasonable efforts to determine a patient's financial assistance eligibility before sending them to collections.

In 2023, compliance with the FAP requirement was effectively universal: 99.3% of Schedule H filers (1,807 of 1,819 hospitals) reported maintaining a written financial assistance policy. On paper, the ACA's requirements appear to have been a resounding success. Nearly every hospital has a policy. Nearly every hospital says it's available to patients who need it.

But having a policy on paper and implementing it in practice are two very different things. The wide variation in charity care spending, from $152,383 at the median small hospital to $92.4 million at the median large system, demonstrates that the existence of a policy tells you almost nothing about the generosity of the care it provides.

Consider what $152,383 in annual charity care means for a hospital. That's less than the annual salary of a single registered nurse in most U.S. metro areas. It means that for 492 small hospitals across the country (rural facilities, community hospitals, critical access hospitals, the places people go when there's nowhere else), the total free care provided to patients who couldn't pay averaged about $417 per day. That's roughly one emergency room visit, if that. These hospitals still receive property tax exemptions, income tax exemptions, and the ability to accept tax-deductible donations. The question is whether $152,000 in charity care justifies what is likely hundreds of thousands or millions in forgone tax revenue for their local counties and school districts.

Providence was not an isolated case. In state after state, attorneys general and journalists have documented cases where patients who should have qualified for financial assistance were billed instead. The mechanisms vary: some hospitals have complex FAP application processes, others impose short deadlines, and others do not inform patients that assistance exists until after a bill has gone to collections. The ACA required hospitals to make "reasonable efforts" to determine eligibility. What constitutes "reasonable" has been left to the hospitals themselves to define.

Bad debt adds another layer to this picture. In addition to the $278.8 billion in community benefit, nonprofit hospitals reported $22.6 billion in bad debt, which represents patient bills deemed uncollectable. The median hospital reported $2.5 million in bad debt, or 2.1% of total expenses. This represents care that was provided, billed, pursued through collections, and ultimately written off. It is not counted as community benefit under IRS rules. But it represents real uncompensated care, care that could have been classified as charity care upfront if the hospital had screened the patient for financial assistance before sending the bill.

The relationship between bad debt and charity care is revealing. Hospitals with robust charity care programs, those that proactively screen patients, publicize their FAP, and make it easy to apply, tend to have higher charity care and lower bad debt. Hospitals with weak charity care programs tend to have the reverse: low charity care and high bad debt. The total uncompensated care may be similar, but the experience for patients is very different. One path leads to a forgiven bill and continued financial stability. The other leads to collections, credit damage, and potential financial hardship.

In fairness, the hospital industry's defense of the current system is not without merit. Nonprofit hospital leaders and their trade associations, most prominently the American Hospital Association (AHA), make several arguments that deserve honest consideration. An analysis that ignores these counterpoints would be incomplete and ultimately less credible.

These arguments are worth taking seriously. Running a hospital is genuinely complex. The regulatory burden is enormous. The financial pressures are real. Many nonprofit hospitals do provide services that for-profit systems avoid, and many serve communities that would otherwise have limited access to care.

But acknowledging the complexity doesn't resolve the central question. Nonprofit hospitals clearly provide value. The question is whether the value they provide is proportional to the $28 billion in annual tax benefits they receive, and whether the current system of self-reported community benefit creates the right incentives for hospitals to serve the patients these exemptions were intended to help.

The data suggests the answer to these questions is, for a significant number of hospitals, no. Not all hospitals. Not even most hospitals. But enough hospitals, controlling enough revenue and serving enough patients, that the gaps are significant enough to warrant closer examination of the framework itself.

The scrutiny is mounting from multiple directions simultaneously. In September 2025, the House Ways and Means Committee held hearings specifically questioning whether tax-exempt hospitals truly earn their exemptions. The Treasury Inspector General for Tax Administration (TIGTA) published a report finding that IRS enforcement referrals for hospital tax exemptions dropped by 98%, meaning the agency responsible for ensuring hospitals meet their community benefit obligations had effectively stopped doing so. The $50,000 excise tax penalty for failing to conduct Community Health Needs Assessments, created by the ACA in 2010, has been imposed so rarely that most hospital administrators don't even know it exists.

At the state level, the picture is more active. Washington State's $158 million settlement with Providence Health drew significant attention across the industry. Oregon passed HB 3076, strengthening hospital community benefit reporting requirements and transparency. California enacted AB 1020, requiring hospitals to screen patients for financial assistance eligibility before pursuing collections, a direct response to evidence that many hospitals were billing patients who should have received free care. Colorado has moved toward tying property tax exemptions to minimum charity care thresholds, a model that directly links tax benefits to charitable output.

Several categories of reform have been proposed or are being actively considered:

The data in this article comes from the hospitals' own filings. Every number was reported by the hospitals themselves, prepared by their own accountants, and submitted to the IRS under their own EIN. The figures reflect how hospitals chose to categorize their community benefit and how they allocated resources between charity care, operations, and compensation.

The question for policymakers is straightforward: are we getting $28 billion worth of community benefit from the $28 billion in tax breaks? For some hospitals, including the academic medical centers training the next generation of doctors, the rural hospitals keeping emergency rooms open in communities with no alternatives, and the systems that proactively screen every patient for financial assistance, the answer is clearly yes. For others, including the systems with 4% community benefit rates, CEO compensation that exceeds charity care budgets, and financial assistance policies that few patients access, the data suggests room for improvement.

The system does not need to be dismantled. But the data suggests it would benefit from stronger enforcement, clearer standards, and greater transparency, changes that would help the public understand what they're getting in return for the tax benefits they provide.

You can explore the complete data for any nonprofit hospital on RoundPaper. Every statistic in this article is derived from publicly available IRS Form 990 Schedule H filings. Search for any hospital by name on our nonprofit search page to see their community benefit, charity care, compensation, and full financial data on their organization profile page. The detailed data tables, state-by-state rankings, and revenue tier benchmarks are available on our Hospital Charity Care insights page.