Nonprofit Hospital
A hospital organized as a tax-exempt entity — making up about 56% of U.S. community hospitals — that reinvests revenue into the community in exchange for federal, state, and local tax exemptions.
How It Works
Nonprofit hospitals receive tax exemptions worth billions annually in exchange for providing "community benefit" — typically including charity care (free or reduced-cost care for the uninsured), community health programs, and medical education. The IRS requires tax-exempt hospitals to conduct Community Health Needs Assessments (CHNAs) every three years and adopt financial assistance policies. Despite the nonprofit designation, many nonprofit hospitals generate significant operating surpluses, maintain large investment portfolios, and pay executives millions. Studies have shown that the median nonprofit hospital provides charity care worth less than the value of its tax exemption — raising questions about whether the community benefit standard is sufficient.
Related Terms
- For-Profit Hospital — An investor-owned hospital that operates to generate returns for shareholders — making up about 25% of U.S. community hospitals, with the rest being nonprofit or government-owned.
- Chargemaster (Charge Description Master) — A hospital's master list of prices for every item and service — from aspirin to surgery — typically containing tens of thousands of line items with prices that bear little relation to actual costs.
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About This Definition
This definition is part of the HospitalCostData Hospital Pricing Glossary — 25 terms explaining hospital costs, quality ratings, and healthcare billing. Written for patients, journalists, researchers, and healthcare professionals.