Most people assume nonprofit hospitals succeed by delivering better care or efficiency, but a major part of their financial strength comes from tax arbitrage.
Unlike private practices, nonprofit hospitals can borrow money through tax-exempt bonds, meaning investors accept lower interest rates because their returns are tax-free. This lets hospitals raise billions at very low cost.
At the same time, these hospitals hold massive investment portfolios that earn untaxed returns. When they pay 2% on borrowed money but earn 6% on investments, that 4% spread is pure profit - a form of indirect tax arbitrage that doesn’t depend on patient care or operations.
This financial advantage fuels expansion and acquisition, leaving independent physicians competing on an uneven playing field. The system rewards financial structure, not clinical value - and it’s perfectly legal.
Read the full article here: https://www.fiercehealthcare.com/providers/large-nonprofit-hospitals-taking-full-advantage-low-interest-debt-untaxed-investments?utm_medium=email&utm_source=nl&utm_campaign=HC-NL-FierceHealthcare&oly_enc_id=9328C1537789G6D