By Rose O. Sherman, EdD, RN, NEA-BC, FAAN
Health systems are facing serious headwinds this year with potential cuts to Medicare, Medicaid, and the federal subsidy of health exchanges. A declining economy also threatens the jobs of a significant number of workers in the US and, with it, their health insurance. But these are not the only challenges. As part of budget legislation and in an attempt to increase tax dollars, the non-profit status of most (but not all) hospitals and health systems is also in jeopardy. Understanding what this means is essential for nurse leaders to advocate effectively.
The health system tax exemption recognizes the value to society of organizations that operate to serve societal needs and deliver benefits without generating profits for shareholders’ private gain. As a non-profit, you are expected to provide a certain number of services for which you will not be reimbursed. As a nonprofit organization, you can set up a 501c3 foundation and accept donations to support your activities and the needs of your employees. You can also issue tax-exempt bonds to reduce borrowing costs.
In the 2025 AHA fact sheet, the following is noted: Nonprofit hospitals are exempt from federal and some state and local taxes. Therefore, besides providing 24/7 care, they must meet the Internal Revenue Service (IRS) Community Benefit Standard and publicly and extensively report the benefits and services they provide to their communities. Nonprofit hospitals offer benefits above and beyond the value of their tax exemption, partly because of the immense value the services, such as education, health screenings, and prevention activities, provide to their communities. An AHA analysis shows that the value of total benefits to the community averaged 15.5% of the hospitals’ total expenses. Direct benefits to patients, which include free care, financial assistance, and spending to fill gaps in Medicaid underpayments, averaged nearly 7% of costs. Overall, the benefit tax-exempt hospitals provided to their communities, as reported on Form 990 Schedule H, is estimated to be $129 billion, 10 times greater than the value of their federal tax exemption.
Beyond the dire implications of having to pay taxes and meet operating budgets in a time when many health systems are in the red, there are also other considerations for nurse leaders:
- The conversion from a non-profit to for-profit status would remove the ability to receive donations to support nursing education and other professional activities that foundations currently fund.
- Health system employees in the Public Student Loan Forgiveness plan must leave systems that convert to for-profit to maintain eligibility. This is estimated at up to 4.8 million nurses, doctors, pharmacists, and other healthcare employees.
- The movement from a non-profit or faith-based health system to a for-profit system is a massive cultural shift and may not be congruent with the values of nurses and their leaders.
- With a change in status, many non-profit systems would either issue a public stock offering or accept a bid from a private equity firm, forcing a shift in practice models, a loss of mission, and a focus on shareholder value.
- The availability of charity care would plummet in the United States, impacting access to care and health equity.
Nurse leaders should carefully track this type of legislation. Even if efforts are unsuccessful in 2025, the push to make most health systems for profit is likely to be ongoing. If you wonder why, as my Dad always said, follow the money when in doubt about the origin of a decision.
© emergingrnleader.com 2025
Our Most Popular Right Now The New World of Work Workshop
Two Brand New Workshops for Your Team in 2025
*** Trending – Building Bridges Not Walls: Leading Multigenerational Work Teams – Click Here for More Information Building Bridges Not Walls
Nurse and Nurse Leader Work-Life Balance and Well-Being: Nursing Leadership Strategies for Success – Click Here for More Information WorkLife Balance and Wellbeing WS
New Book – Click Here to Buy
LinkedIn
Instagram