Under what conditions should non-profit status be allowed to continue?

Continuing on in the theme of questioning the appropriateness of the non-profit status of many hospitals, KFF Health News published a column highlighting some of the questionable facets of various healthcare systems in the US. The author called some of these systems "diversified businesses" and notes the lavish executive compensation at these institutions, with CEO salaries outpacing the CEO salaries of large philanthropic foundations. The author places at least some of the blame on the regulators who ought scrutinize whether these large health systems should continue to enjoy the benefits of a non-profit status. The author notes that these institutions spend large amounts of money on political lobbying, which likely allows them to avoid scrutiny.

For historical context, the article explains that hospitals "were accorded nonprofit status for doling out free care during an era in which fewer people had insurance and bills were modest." That arrangement reduces the transparency, both in terms of the benefit received, as well as the cost of that community benefit. An alternative would have been for hospitals to not be given non-profit status and to continue to charge to provide care, while the government could pay for medical care for the indigent. Under that alternative, hospitals would have a stronger incentive to attract and care for patients (even if the patients cannot pay the procedure costs), while the government would more clearly know how much it is spending on medical care. Despite the benefits of such an arrangement, however, it is likely that that visibility into actual costs makes the alternative less appealing politically.