When Did Charity Care Becomes a Business Strategy
How the largest health systems captured nearly $40 BILLION of tax payer cash.
Executive Summary
Nonprofit hospitals in the United States receive tens of billions in tax breaks each year. In return, they’re supposed to invest in the health of their communities. But the data is clear: most don’t.
In 2021, nonprofit health systems received an estimated $37.4 billion in tax benefits. Conveniently, the data for 2022-2024 are not yet publicly available. Experts anticipate numbers close to $50 billion.
Yet 80% spent less on charity and community investment than the value of those exemptions. The total national deficit was $25.7 billion, and the top ten systems alone accounted for nearly one-third of it.
This isn’t an isolated failure. It’s a structural problem: a drift away from mission, enabled by weak accountability and shielded by reputation. And taxpayers, patients, and physicians are the ones left holding the bill.
The Theory of Institutional Drift
Clayton Christensen taught us that organizations rarely fail overnight. They fail by drifting, slowly replacing their original purpose with behaviors that protect their scale, their margins, and their prestige.
Nonprofit health systems were established to expand access to care and enhance community health. Today, too many allocate resources toward financial engineering, mergers, and empire-building. What once was a mission has become a business model.
We can see three types of drift at work:
Mission Drift – Institutions founded to serve communities are now optimized for margin expansion and acquisition.
Structural Drift – Tax exemptions, meant as incentives, have calcified into entitlements with no teeth.
Perceptual Drift – Systems like Mayo Clinic or Mass General Brigham still trade on reputational halos, even as they run some of the largest per-hospital charity deficits in the country.
The Top 10 Systems Gaming Charity Care
Ranked by Fair Share Deficit (2021):
Kaiser Permanente (CA) – $1.2B deficit, 35 hospitals ($34.3M per hospital)
Providence (WA) – $1.0B deficit, 43 hospitals
CommonSpirit (IL) – $923M deficit, 101 hospitals
Trinity Health (MI) – $784M deficit, 69 hospitals
Ascension (MO) – $614M deficit, 72 hospitals
UPMC (PA) – $578M deficit, 23 hospitals; $268M at Presbyterian alone
Bon Secours Mercy (OH) – $488M deficit, 34 hospitals
Advocate Health (NC) – $479M deficit, 23 hospitals
Mayo Clinic (MN) – $478M deficit, 18 hospitals ($26.6M per hospital)
Mass General Brigham (MA) – $461M deficit, 9 hospitals ($51.2M per hospital)
Together, these ten systems represent $7.6 billion in shortfalls, 30% of the national deficit.
Patterns We Can’t Ignore
Catholic Systems Dominate: Providence, CommonSpirit, Trinity, Ascension, and Bon Secours together represent $3.8B in deficits, a higher share than their hospital footprint.
Prestige ≠ Performance: Academic flagships like Mayo and Mass General Brigham fall dramatically short of their charitable obligations.
Scale Without Return: CommonSpirit operates 101 hospitals, yet underperforms per site compared to peers. Bigger here does not mean better.
Implications for Reform
In innovation theory, misaligned incentives cause industries to stagnate until new rules or new entrants restore balance. The nonprofit hospital sector is no different. Three reforms matter most:
Tax Reform – Tie exemptions directly to community benefit thresholds (minimum 5.9% of expenditures).
Transparency Reform – Require standardized, verifiable reporting of charity care, eliminating accounting maneuvers that inflate the numbers.
Accountability Reform – Enforce real consequences for chronic underperformance, from public disclosure to loss of exemption.
Where Dutch Rojas Comes In
Here’s the problem with the way this story is usually told: it sounds like a policy seminar. But the stakes are very real.
Every dollar these systems don’t spend on charity is a dollar patients and physicians are forced to make up in higher costs, narrower networks, and fewer choices.
Taxpayers subsidize billion-dollar deficits while being told nonprofit status is synonymous with virtue.
Independent physicians are locked out of the market, while nonprofit giants use tax shields as a means of consolidation.
The American people are being taken advantage of, and it needs to stop.
Conclusion: A Broken Social Contract
The nonprofit designation is not simply a tax category. It is a social contract, a promise to communities that public subsidies will be returned as public value.
When health systems pocket billions in tax benefits while delivering a fraction back, they aren’t just failing, they’re betraying that contract.
The good news?
Systems that drift can be disrupted.
Real transparency, physician-led coalitions, and direct-to-employer models show us another path, one where independence and accountability replace bureaucracy and entitlement.
-Rojas out