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The first time I ever left my home country of Pakistan was during my final year of medical school when I went to work for a month at the Cleveland Clinic. With my first view of the hospital I felt like I had stumbled into one of the wonders of the world, its buildings like shimmering pyramids and its infinity pool nearly spanning my field of view. Yet one of my most lasting memories from that month is of making my first grocery run. As soon as I stepped off the hospital’s grounds, I entered a different world filled with decrepit houses and broken roads — a world not too different from the low-income country I had just left.

At a time when tax reform is at the top of legislative priorities, it is easy to forget that most of the richest and most profitable hospital systems in the United States enjoy tax-exempt status. They were given this in exchange for providing benefits to their local communities, like charity care and medical outreach. However, as Politico’s Dan Diamond recently reported about the Mayo Clinic, whether those hospitals serve inner-city neighborhoods or sparsely populated rural areas, they frequently overlook the communities they are required to serve.


Cleveland Clinic and Mayo Clinic, two of the leading health systems in the world, are far from the only prestigious nonprofit medical centers that have failed to significantly improve health in their own backyards. Many such hospitals that have provided scientific advances and unparalleled health care to millions have been slow to move the needle with regard to the people who live in their shadows. Even as many nonprofit hospitals have seen record profits, their contributions back to the community have dwindled since passage of the Affordable Care Act.

The irony is that a majority of the most prominent and profitable hospitals in the United States are nonprofit, and have fought tooth and nail to maintain that status even as their revenues have skyrocketed. When it comes to marketing themselves, nonprofit hospitals, many of which are academic medical centers, take no prisoners, and appear to be more interested in driving up profits than improving health. Most services advertised by academic medical centers are for unproven or cosmetic procedures that generally lack a strong evidence base and are rarely accompanied by appropriate disclosures. They tend to tout the benefits but soft-shoe the risks. A content analysis of advertisements from National Cancer Institute-designated centers showed that they focused on emotional manipulation even more than for-profit hospitals did, and rarely discussed the risks of treatment. When hope doesn’t work, hospitals are quick to invoke fear.

My own fear is that if academic medical centers and other nonprofit hospitals don’t reform themselves, their nonprofit status might become threatened. There have certainly been rumblings in that direction. In 2013, Pittsburgh’s mayor, Luke Ravenstahl, sued the University of Pittsburgh Medical Center, challenging its nonprofit status. The IRS revoked the tax-exempt status of a hospital early this year because it failed to conduct a community needs assessment. The tax-exempt status of hospitals has also been challenged in courts with mixed results.


One justification given for academic medical centers’ nonprofit status is that they do a lot of the heavy lifting with regards to taking care of sicker individuals with fewer means. Yet not all pull their weight: Academic medical centers in New York City are less likely to admit black patients or those without private insurance than academic centers in Boston. Furthermore, the amount of free care delivered by hospitals has plummeted since passage of the Affordable Care Act, which drastically reduced the number of uninsured individuals.

For now, nonprofit hospitals direct a portion of their revenues back into the communities with hardly any oversight. Before outrage gathers more steam, hospitals need to better define what constitutes “community benefit,” which for now has largely been left to hospitals’ discretion. As we move toward models of payments in which hospital systems get rewarded for the quality of the health care they deliver, and not the volume of services, they might not be able to overlook the health of the people who live around them.

Few medical interventions can transform health in a way that partnering with communities can. As an example, take end-of-life care, one of the most vexing problems in modern medicine. The best and most patient-centered end-of-life care is delivered not in a self-styled medical mecca such as Boston or Baltimore, but in the small town of Lacrosse, Wis. There, the local health system teamed up with the community to talk about end-of-life issues. That effort resulted in the highest rate of completed advance directives and lowest use of acute medical services at the end of life throughout the United States. Leaders at Duke University Medical Center, where I work, are now partnering with local communities to overcome racial disparities in health care.

I can think of four creative ways to make hospitals more accountable to their communities:

Tie marketing budgets to community health. One way to balance hospitals’ responsibilities to their communities with their goal to maximize revenue would be to have them match their community benefit contribution with their marketing budgets.

Redefine reimbursements. Hospitals are currently paid largely on a fee-for-service basis — they get paid for what they do, not necessarily what outcomes they achieve. Increasingly, there is movement towards payment models that base reimbursement on the health outcomes of the population the hospital serves. Such models align very well with the purported mission of tax-exempt hospitals to improve health in the community and should be promoted further.

Board representation. Nonprofit hospitals should be required to have prominent community leaders on their boards who can advocate for the needs of the community.

Preset give-backs. A fixed percentage of nonprofit hospitals’ earnings should go directly back to the community, though hospitals should be given flexibility to decide how that money is used. Examples include creating interventions that use community health workers to improve the health of local communities, developing the infrastructure necessary to transition from fee-for-service to population-based payment models, and funding research in community health projects.

As American society works to overcome inequality, hospitals are uniquely positioned to become part of the solution. The people who run hospitals must think about what is truly their mission. Not answerable to either shareholders or taxpayers, they need to do more to serve their local communities. The health of those living in the neighborhoods surrounding hospitals should be at least as good as the health of the people they discharge each day.

Rather than merely accepting their tax-exempt status, they need to begin earning it.

Haider Warraich, M.D., is a fellow in cardiology at Duke University Medical Center and the Duke Clinical Research Institute, and author of “Modern Death: How Medicine Changed the End of Life” (St. Martin’s Press). The views expressed in this article are solely those of the author and do not necessarily reflect those of his employer.

Hear Warraich talk more about hospitals on an episode of the “First Opinion Podcast.”

  • Its bizarre that any business that receives the monetary gift of non profit status should be in charge of any aspect of it. Tell them about the deal the Cleveland Clinic wrangled for themselves with their Retroactive exemption of property taxes. We now owe them back to 2013. CC somehow pays for the Cavaliers practice facility. That somehow qualifies as the players can’t afford to pay for their own practice facility … but somehow basketball fans are made happier, so it passes. Its always the least represented that pays the bills.

  • Great article. Thank you for writing this. I wholeheartedly agree with you. I believe that the IRS should remove the nonprofit status of hospitals that are not worthy of being tax exempt. I wrote an article for People’s World about Healthcare for Profit that echoed similar sentiments.

  • In 1995 I was Director of Staff Relations at Delano Regional Medical Center, the largest health care provider in Northern Kern County. As Director I attended Board meetings, Management meetings and worked on the Strategic Plan with community members. It was a much different time but the driving concern was how to deliver better health care services to the community, not maximizing profitability. We gave serious consideration and constant attention to the organizations financial health but gave equal concern in finding ways of caring for our community through increased access to health care services, improvement in diagnostic equipment for better outcomes and improving outcomes. We examined studies trying to explain the high rate of cardiology issues in the community, examined examples of community diet, occupations, conducted neighborhood surveys. We opened a clinic in Wasco to help decrease dependence on our ER. Many residents worked well past physician office hours, and used the ER as their doctor office. The Wasco clinic helped to change some of that.
    It has been many years since my tenure in Delano taking me to much different industries but if healthcare has moved away from those basic principals, and if ACA has only increased that distance, it is time for a change back to basics. A healthcare system that truly cares and partners with the community it serves.

  • Dr Warriach is right. The cruel irony is that what once had been hyped as egalitarian has become a multi tiered monster, with the hosting community left with little.

    Decades ago when I trained, critics complained of bloated billing from hospital and doctors. “Healthcare should not cost so much,” everyone shrieked. The solution: Doctors must justify treatments.
    Now Doctors are mostly banished from treatment. We have become the data entry folks who match up patterns of check boxes with permitted tests and meds. No thinking outside this Check Box, here. If your illness does not fit with the recognized pattern, you are “Shucks out of Luck.”
    This miracle of cost containment has been accomplished by a fleet of regulators who perpetually swarm around facilities, decide meds, length of stay, quality of care, etc. About 20 years ago, the WSJ reported the cost of “Managed Care” had exceeded the savings from the infamous “bloat.” Yet these regulations only flourish, like a cancer of fear, insinuating itself into every micro-decision made in a hospital, disrupting common sense responses. No one is to be trusted, and certainly not to think.
    Several years ago, a nursing supervisor cried out that a chart remained uncompleted, while bedlam reigned on a floor in a state hospital. I said,” We treat patients here, not charts,” above the bone-chilling roar of psychosis. She snapped, “No we treat charts.”
    She was right then, and more right now.
    Sure, some hospitals have gone “Hollywood,” attracting patients above and beyond the “grid.” Sure, they have lost their mission statements on the way. One scorching August day, I became SOB walking one such Tertiary Center. The round trip from the inpatient to the consultation was 1 1/2 miles. What do patients do?
    The point is that our intention in medicine is no longer about helping. We’ve abdicated and adopted a new lingo pushed by politicians: healthcare was no longer about health, but became an “industry.” Different Rules here. Patients became “consumers” and doctors were neutralized to “providers.” And this country voluntarily let go of what’s most important in healthcare – intention. That collective spiritual spark was extinguished by what would seem a well-orchestrated assault on the private doctors. Onceuon a time long ago, private doctors could only survive by providing “patient satisfaction,” this “new” buzz word.

    To be fair. We did not just give up, we were assaulted. A tsunami of political speak of patient gaining empowerment and doctors loosing credibility, the unholy allegiance of big pharm and universities, and the sell-out of our professional organizations.
    You see our world, even this healthcare industry world, is holographic. If you demoralize and disenfranchise those who make health care happen, you will get corruption at the top. Corruption at the top breeds an embarrassment of glitz and glamor and an increase in physician suicides, aside from the many other professionals that make healthcare happen .
    Hollywood Hospitals are the least of our problems.

    Peggy Finston MD

    • I’ve worked on both sides of the fence. Although EMR feels like it has done more harm than good, it is a work in process. In the future, there will be no manual (keystrokes) entry which takes up so much provider time and patients will have their medical records follow them. Healthcare has become 20% of the economy in the US and there will be pressure (regulators/auditors)from lots of different angles to drive it down. Elaborate hospitals who don’t pay any taxes are just a piece of the puzzle.

  • Conflating payment mechanisms (e.g., fee for service vs global) with community benefits, I’d argue, is off the point. Also, boards already comprise many community leaders. The other two suggestions would be easily gamed.

    You can’t let each hospital decide how it should meet a community benefit standard: The state needs to have definitive rules and standards in place. Most jurisdictions won’t do this because the hospitals have political power and squash attempts in this direction.

  • Years ago, I had the pleasure of helping City Life/Vida Urbana write a grant for the Healthy Homes Healthy Families program. They placed housing counselors at community health centers to help patients with the full range of landlord tenant issues, including lack of adequate and safe heat, insects and rodents, mold, other indoor air quality hazards, and eviction notices. It was quite successful and became something of an early model for SDOH social determinants of health. For example, asthma treatment becomes a lot easier if allergens are removed and the air is cleaner, and when patients move to shelters, follow up is lost.

    Every nonprofit hospital should have support relationships with community health centers and work on SDOH, including dental care, as we exclude it from medical care.

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