Washington State’s healthcare system has a problem lawmakers can no longer ignore. So-called nonprofit hospitals are behaving like aggressive, profit-maximizing corporations while enjoying enormous tax breaks intended for charities. The contradiction is becoming impossible to defend.
Across the country, more than half of the nation’s roughly 5,000 hospitals operate as nonprofits. In theory, the arrangement reflects a social contract: hospitals receive lucrative tax exemptions—sometimes worth billions—in exchange for providing community benefits such as free or discounted care to low-income patients.
In Washington State, however, that contract appears to be breaking down.
Consider Providence, one of the state’s largest nonprofit health systems. Because of its nonprofit status, Providence avoids more than $1 billion annually in taxes. In exchange, the public reasonably expects charitable behavior and meaningful community support.
Instead, investigations have shown that Providence has deployed aggressive debt collectors to pursue unpaid bills from patients who actually qualified for free care. Families already struggling with medical crises report being hounded by collections agencies for bills they should never have received in the first place.
This is not a minor administrative mistake. It is a systemic failure that raises fundamental questions about whether institutions like Providence are honoring the obligations that come with tax-exempt status.
In fact, the behavior has become so normalized that some hospital executives no longer bother to obscure it. In 2021, Providence CEO Dr. Rod Hochman told an industry publication that the phrase “nonprofit health care” is essentially misleading.
“Nonprofit health care is a misnomer,” Hochman said. “It is tax-exempt health care. It still makes profits.”
The candor may be refreshing. But it is also deeply unsettling.
If nonprofit hospitals openly acknowledge that they operate like profit-seeking enterprises, then taxpayers are justified in asking a simple question: why should the public continue subsidizing them as charities?
The issue becomes even more complicated when examining the corporate structures operating inside Washington’s health care system.
Consider Kaiser Permanente. The organization functions through a carefully constructed network of entities with different tax classifications. The Kaiser Foundation Health Plan and Kaiser Foundation Hospitals operate as tax-exempt nonprofits under federal law. The physicians who provide medical services through the affiliated Permanente Medical Groups, however, are organized as for-profit professional corporations.
In practice, these entities operate as a single integrated system. The nonprofit arms benefit from tax exemptions and other advantages intended for charitable institutions, while the physician groups function as profit-generating businesses within the same ecosystem.
The arrangement raises a straightforward question: how exactly does a nonprofit charity end up owning or operating a for-profit medical corporation?
For regulators and taxpayers alike, the answer has become increasingly murky.
Meanwhile, the financial numbers tell their own story. Nonprofit health plans in Washington have amassed enormous surpluses. Between 2012 and 2020, reserves held by nonprofit carriers nearly doubled, rising from $2.4 billion to roughly $4.4 billion.
Those ballooning financial cushions have finally begun to attract legislative attention. Lawmakers introduced House Bill 2073 during the 2025–2026 session to address what many believe are excessive surpluses held by nonprofit insurers. That effort is a step in the right direction, but it barely scratches the surface of the larger problem.
Washington’s nonprofit health care institutions benefit from public subsidies worth billions of dollars. Those subsidies were never intended to fund sophisticated corporate structures, massive financial reserves, or aggressive debt-collection operations targeting vulnerable patients. They were meant to support charitable health care.
When patients entitled to free care are pursued for payment, when nonprofit systems accumulate enormous surpluses, and when tax-exempt entities operate alongside profit-making subsidiaries, it becomes clear the system has drifted far from its original purpose.
This is not simply a policy debate. It is a matter of public trust.
Tax exemptions are a public subsidy. In return, the public deserves transparency, accountability, and genuine community benefit.
Washington lawmakers should act accordingly. The legislature should strengthen oversight of nonprofit hospitals, enforce clear standards for charity-care compliance, scrutinize complex nonprofit-for-profit corporate arrangements, and ensure that tax exemptions are justified by measurable community benefits.
If institutions want the privileges of nonprofit status, they must accept the responsibilities that come with it.
Otherwise, taxpayers are simply subsidizing corporate health care profit centers masquerading as charities.
