Hospitals claiming nonprofit status are supposed to serve community needs, especially aiding the poor, but some have developed tactics that undermine their charitable missions. In recent years, there has been increased scrutiny over how these institutions balance their tax exemptions with aggressive collection practices and profit-driven motives. One prominent example is Providence, a large nonprofit health system based in Renton, Washington, which has faced allegations of pressuring patients, including those eligible for free care, to pay debts they might not owe or should be exempt from under law.
The story begins with Providence’s 2018 introduction of a controversial campaign called Rev-Up, designed to maximize revenue from all patients, regardless of their income status. Internal training materials obtained by investigative reporters revealed that staff were instructed to ask patients how they wanted to pay without mentioning financial assistance options. Employees were told to ask every patient, every time, and to view collecting payments as a core part of their role—leaving little room for compassion or discretion. When patients failed to pay, the hospital quickly dispatched debt collectors to pursue them, even when those patients qualified for free care under state law.
This aggressive approach is part of a broader pattern seen across many nonprofit hospitals, which enjoy significant tax breaks—such as avoiding over a billion dollars annually in taxes—by providing community benefits. According to federal law, these benefits include offering free or discounted care to low-income individuals. Yet, many hospitals have shifted focus from their traditional mission, adopting systems that convert needy patients into revenue sources. Such practices often lead to patients being saddled with debts they do not owe, damaging credit scores and forcing families to cut back on essentials like groceries.
In the case of Providence, the hospital system’s financial disclosures show a stark decline in charity care spending—from 1.24% of expenses in 2018 to less than 1% last year. Meanwhile, Providence’s financial reserves have grown to $10 billion, invested alongside private equity firms, and the system even operates its own venture capital fund. These investments enable Providence to sustain its expansive growth—adding hospitals and clinics—and secure favorable borrowing rates, all while reducing its charitable commitments.
Legal battles have emerged over Providence’s practices. The state of Washington, where Providence is based, filed suit alleging the hospital system violated laws requiring it to provide free care to those earning below 300% of the federal poverty level. Providence’s response was to pledge to cease using debt collectors for low-income patients, yet reports from California and Oregon reveal that patients there still face harassment, exorbitant charges, and damaged credit scores despite qualifying for free care. The hospital’s chief financial officer, Gregory Hoffman, expressed concern over findings suggesting poor treatment of vulnerable populations, stating Providence aims to correct its course.
Providence’s spokesperson, Melissa Tizon, maintained that the hospital system complies with and often exceeds state legal requirements, emphasizing that the organization has stopped aggressive collection tactics like wage garnishments or credit reporting for eligible patients. She also highlighted that Providence has increased its Medicaid patient load and continues to invest in community health, asserting that the system’s practices are aligned with its mission to serve all, especially the most vulnerable.
The evolution of nonprofit hospitals’ role in healthcare financing dates back to the 1960s with the advent of Medicare and Medicaid, which expanded insurance access for millions. The IRS initially allowed hospitals to justify their tax-exempt status by contributing to community welfare, but there have long been concerns about abuse. IRS commissioner Mark W. Everson warned in 2005 that some hospitals did not significantly differ from for-profit providers in their operations or charity efforts. Providence’s CEO, Dr. Rod Hochman, openly acknowledged that “nonprofit” is a misnomer, emphasizing that these institutions are still profit-generating entities that benefit from significant tax advantages.
Since taking the helm in 2013, Hochman has overseen Providence’s transformation into a financial powerhouse, with profits exceeding $1 billion annually through investments. The hospital system’s expansion included opening or acquiring 18 new hospitals over the last decade, and its leaders earn substantial compensation—Hochman himself took home $10 million in 2020. These financial pursuits often come at the expense of their charitable obligations, as evidenced by cases like that of Harriet Haffner-Ratliffe, who, after giving birth at a Providence hospital, was billed nearly $2,300 despite being eligible for free care. When she fell behind on payments, debt collectors pursued her, damaging her credit and pushing her closer to financial hardship.
Before the Rev-Up program, Providence was already engaging in aggressive collection practices, sometimes violating state laws. Internal documents and employee testimonies reveal that staff were trained to push payments onto patients, even those clearly eligible for assistance. A 2018 consulting engagement with McKinsey & Co. aimed specifically to maximize revenue collection, leading to the development of tactics that instructed staff to insist on payment, ask about half-payments, or set up payment plans—only suggesting financial aid as a last resort. These practices, often cloaked in language about transparency, have raised serious ethical questions about the hospital’s commitment to its stated mission.
Some employees, like Taylor Davison, have spoken out about feeling pressured to pursue payments at the worst moments in patients’ lives, documenting their efforts to push for payments regardless of individual circumstances. Such practices have drawn criticism from patient advocates and regulators, highlighting the tension between hospital revenue goals and the core purpose of providing accessible, compassionate care.
As debates continue over the role of nonprofit hospitals, it becomes crucial to scrutinize how these institutions balance their tax advantages with their obligations to serve the community. The legal frameworks, such as those governing charity care policies, vary by state, and ongoing lawsuits and investigations aim to ensure hospitals adhere to their commitments. Understanding the legal and ethical boundaries in healthcare revenue collection remains vital for safeguarding vulnerable populations and maintaining trust in the healthcare system. For more insights into how hospitals navigate these complex issues, see this comprehensive guide on healthcare payment classifications, which explains how payment systems influence hospital billing practices.