The United States hospital industry comprises a mix of ownership forms. While government and for-profit hospitals play pivotal roles in the U.S, non-profit hospitals are the most common. Non-profit hospitals are those that are organized as non-profit corporations. Not-for-profit hospitals are characterized by exemption from paying local and state property taxes or federal income, and consequently, they are established for charitable purposes. Tax-exempt bonds may also be issued on behalf of non-profit hospitals. The hospitals provide various defined public goods, for instance, service, community welfare, and education. Additionally, non-profit hospitals are mostly funded by religion, charity, or educational funds, with some being religiously affiliated. Moreover, non-profit hospitals have rules that govern their operation and existence. For instance, the facilities are mandated to have a written policy that indicates how the hospital will assist patients who need financial support and how the charges are calculated. Policymakers often scrutinize the various exemptions granted to non-profit hospitals, with an aim to establish whether they provide community benefits that warrant the forgone tax revenues.
Non-profit facilities are highly lucrative and can legally make massive profits, given the substantial tax breaks associated with their non-profit status. Non-profit status does not indicate that the hospitals do not make any profit. Rather, it implies that the profits obtained are reinvested in the hospital to enable the hospital to acquire new facilities and equipment, buy out competing health systems and hospitals, offer more services, and expand staff. Non-profit facilities make considerable profits since they are exempted from state and local property taxes, in addition to sales and income taxes. The hospitals also make profits by issuing tax-exempt bonds. Overall, by reinvesting in facilities and expanding service provision, non-profit hospitals translate into huge hospital systems that bring more revenues to the facilities.
