Nonprofit Hospitals Drive Healthcare Costs, Report Finds

Nonprofit hospitals are a major driver of America’s rising healthcare costs, consuming over $1.5 trillion in 2023 due to inefficiencies, unclear pricing and executive excess, according to a new report by the Center for Medicine in the Public Interest (CMPI).

While drug prices and insurance companies often draw scrutiny, the report shifts the spotlight to hospitals—particularly nonprofit systems—as the main contributor to inflating costs.

These organizations, which account for nearly one-third of the nation's $5 trillion in annual healthcare spending, typically operate with little financial transparency while benefiting from public subsidies and tax-exempt status.

Over the past 25 years, hospital prices have surged more than 250%, outpacing both medical inflation and the overall economy.

Much of this growth is due to the fee-for-service (FFS) model, which incentivizes hospitals to maximize billable procedures rather than focus on outcomes.

In 2024, this model alone led to an estimated $25.7 billion in misaligned spending, according to the report.

“From hospital mergers to executive and administrative pay to site-based fees, hospitals are increasing costs for Americans without oversight or accountability,” CMPI President Peter Pitts said in a news release. “Patients deserve to know what they are paying for and to pay based on the service, not the location of care.”

A detailed case study in the report focused on New York’s nonprofit hospitals, showing how these institutions often demand high prices from private insurers while excluding Medicaid patients.

Hospital prices have surged more than 250% over the last 2 decades, outpacing both medical inflation and the overall economy. Much of this growth is due to the fee-for-service (FFS) model, which incentivizes hospitals to maximize billable procedures rather than focus on outcomes.

Despite federal efforts to curb surprise billing, patients continue receiving costly out-of-network charges.

The report also highlighted aggressive debt collection practices—over 53,000 lawsuits in five years—and widespread failure to comply with price transparency laws.

Even with hundreds of millions in private donations and major tax exemptions, many New York hospitals rank poorly in providing charity care.

“As the U.S. Senate works through the 'Big, Beautiful Bill' and looks at reining in waste, fraud, and abuse, hospitals must be central in that conversation,” report co-author Jerry Rogers said in the release. “We cannot afford to offer tax breaks to nonprofit hospitals just so they can pay their CEOs exorbitant sums of money, inflate their prices, and speculate on real estate. Taxpayers deserve better.”

State and federal officials are also taking notice.

President Trump recently signed an executive order promoting “radical price transparency.”

Florida Attorney General James Uthmeier issued subpoenas to ensure hospital compliance with state transparency laws.

In addition, Indiana Governor Mike Braun signed legislation threatening nonprofit status for hospitals charging excessively high prices.

Nationally, the Lown Institute found that 80% of nonprofit hospitals spent less on financial assistance and community health than the value of their tax exemptions.

In 2024 alone, these “fair share deficits” totaled $25.7 billion—enough to eliminate all medical debt in California, Texas, New York and Pennsylvania combined, the CMPI report found.

The Cleveland Clinic shared another example of this case where the health system received over $1 billion in taxpayer drug-assistance funds between 2020 and 2023, but instead of reducing costs for low-income patients, it funneled money into general revenue—paying 22 executives over $1 million each and ending the year with nearly $1 billion in profit.

“Hospitals have remained in the shadows for too long, and the divergence between the mission of nonprofit hospitals and their operations can no longer be ignored,” added Pitts. “Profits cannot be placed over patient well-being, and revenue must not be prioritized over responsibility.”

While Congress has yet to tackle hospital reform directly, many proposals are gaining traction.

For example, the Senate’s “Same Care, Lower Cost Act” would implement site-neutral payments—tying reimbursement to the service rather than location—which could save $157 billion over 10 years.

In the House, the “Holding Nonprofit Hospitals Accountable Act” would link tax exemptions to new community benefit standards. International comparisons highlight the U.S. system’s inefficiency.

Countries such as Canada and Germany use centralized price negotiation and transparency, helping curb costs and align spending with patient outcomes.

Authors suggest that real reform must include price transparency, stricter nonprofit accountability and alignment of incentives with patient health—not hospital revenue.