Why nonprofits? Hospitals and the future of American health care

The future of the nonprofit hospital depends on its relationship to the for-profit and governmental sectors of our economy. A decade ago, the primary challenge came from the growing investor-owned hospital companies. Nonprofit hospitals' responses--both competitive and imitative--led to new challenges from government regarding tax-exempt status. The reasons underlying this challenge include the growing commercialism of health care, the nation's failure to deal directly with the problem of the uninsured, and the lack of a coherent theory of tax exemption. Although hospitals are likely to retain exemptions from federal taxation, challenges to local tax exemptions are likely to continue. Strategies that hospitals pursue for competitive purposes may undercut their legitimacy as tax-exempt institutions, but several groups are working to address the issue.