Nonprofit hospital chains are buying up billions of dollars’ worth of real estate across the US, dodging property taxes using their charity status.
Nonprofit hospital chains are buying up billions of dollars’ worth of real estate around the country, milking them for income while using their charity status to avoid paying property taxes that fund schools, emergency departments, and other community services. Using their taxpayer-subsidized fortunes, some hospitals are trying to influence local elections in which their profits could be at stake — including a new effort to unseat a progressive mayor who’s cracking down on a hospital giant’s tax-exempt real estate empire.
Nonprofit hospitals are exempt from paying most federal, state, and local taxes in exchange for providing free or discounted medical care, along with other charitable acts like substance abuse treatment programs. But many of these medical centers are using only a fraction of their tax breaks on charitable care and are instead spending millions or billions on assets like real estate.
Once these properties are incorporated into the nonprofit organization, they are no longer subject to property taxes. It’s a practice that many argue is an abuse of hospitals’ tax-exempt status, stripping tax revenue that local governments use to pay for a wide range of services.
A soon-to-be-released study of hundreds of hospitals nationwide by the Lown Institute, a nonpartisan think tank, found that the top 10 percent of hospitals hold an average of $18 million in tax-exempt properties, according to data shared with the Lever. In Massachusetts, for example, the total value of property tax exemptions across the fifty hospitals included in the study is estimated to be $340 million.
“How does the goal of the nonprofit laws square with a hospital consolidating land in this way and just generally power in this way?” said Pat Garofalo, director of state and local policy at the American Economic Liberties Project, a nonprofit that advocates for corporate accountability legislation. “Whatever the end game is, the public is now subsidizing these purchases.”
One of the biggest players in this hospital–real estate scheme is the University of Pittsburgh Medical Center, the largest nongovernment employer in Pennsylvania. As of 2021, the medical center owned $2.1 billion worth of tax-exempt properties — nearly a fifth of all nongovernment tax-exempt properties across Allegheny County, where Pittsburgh resides. The organization maintains that these properties should be tax-exempt as they support its “charitable mission.”
To protect its status, the hospital giant is putting its thumb on the scale in Pittsburgh’s hotly contested mayoral race, in which the runoff election is taking place on May 20. The incumbent, Ed Gainey, was elected in 2021 and has been a vocal critic of the medical center’s growing portfolio of tax-exempt properties, alleging that the center is misusing its nonprofit status by granting tax exemptions to ineligible properties.
The progressive mayor is facing a stiff challenge from County Controller Corey O’Connor, who is running as the top choice of the Pittsburgh development and real estate communities, raking in cash from local real estate moguls, longtime Republican donors, and notably, hospital board members.
That includes board members of the University of Pittsburgh Medical Center and its associated Children’s Hospital Foundation. All together, these members and their families have contributed at least $25,000 toward O’Connor’s mayoral campaign so far this year, according to campaign finance records.
O’Connor’s ties to the University of Pittsburgh Medical Center run deep. The current first vice chair of the hospital network’s board of directors, John Verbanac, was a political adviser to former Pittsburgh mayor Bob O’Connor, O’Connor’s father.
Before the checks came in, O’Connor publicly supported Gainey’s more aggressive approach to “fight so-called charities abusing their tax-exempt status.” Following these donations in January and February, he changed his tune, calling out the mayor’s legal efforts to challenge the University of Pittsburgh Medical Center’s tax exemptions and claiming he will “work with the nonprofits” to “better fund our core needs like bridges, vehicles, paving, and snow removal.”
In response to a request for comment, O’Connor, via his campaign manager, wrote in an emailed statement, “My opponent has received thousands of dollars from the same class of donors throughout this cycle. I will continue to fight to ensure our major nonprofits pay their fair share. My position has never changed and never will. This mayor has cost our region millions of dollars, and we deserve better.”
The O’Connor campaign did not respond to a request to clarify who it was referring to when it noted Gainey had received donations from “the same class of donors.” According to financial records, Gainey has not received contributions from top-level board members at the University of Pittsburgh Medical Center so far this year.
The University of Pittsburgh Medical Center did not respond to requests for comment.
“What Are We Getting for It?”
Critics say the University of Pittsburgh Medical Center exemplifies a nationwide trend of nonprofit hospitals exploiting their generous tax-exempt status. As of 2021, these medical centers received nearly $40 billion in total tax benefits, including almost $8 billion in local property taxes.
Regardless of such tax breaks, a 2024 report by the Lown Institute found that 80 percent of the 2,425 hospitals analyzed spent less on charity care and community investment than the estimated value of their tax breaks — what the researchers call a fair-share deficit.
As of 2020, the University of Pittsburgh Medical Center’s Presbyterian Shadyside hospital had the largest fair-share deficit, spending $246 million less on charity than they received in tax breaks. That amount would be enough to pay off the medical debts of more than 167,000 people throughout Pennsylvania.
“It’s not that you are providing the community with charity, it’s that the community is providing you a tax break, and what are we getting for it?” said Vikas Saini, president of the Lown Institute.
Saini and his colleagues are currently examining the assessed values of nonprofit hospitals’ property holdings for a study scheduled to publish this April. According to data shared with the Lever, New York-Presbyterian, the primary teaching hospital for Columbia University’s medical school, avoids roughly $173 million in property taxes for buildings located in Manhattan and Brooklyn. Mount Sinai Hospital, which has properties in Manhattan and Queens, avoids about $78 million in property taxes.
“It ends up being real money,” said Saini. “If you were paying taxes, that money would be going into the coffers of state and local [governments], and what could that money do?”
Many tax-exempt hospitals claim they are giving back to the community through essential benefits like health education, research, and “charity care,” or medical services that are provided for free or at reduced cost for low-income patients. Yet according to a 2021 study from researchers at Johns Hopkins Bloomberg School of Public Health, for-profit hospitals provide 65 percent more charity care than nonprofit ones — with some nonprofit hospitals going as far as to sue or garnish the wages of low-income patients who can’t afford their medical bills.
The University of Pittsburgh Medical Center, which is also the largest insurer in western Pennsylvania, has received substantial criticism for its financial practices. The hospital giant is made up of over forty hospitals throughout Pennsylvania, Maryland, and West Virginia, with international locations in Italy, Ireland, and Croatia. Last year, they reportedly spent $50 million to purchase a corporate jet to fly to their international hospitals — roughly the same amount of money the hospital chain receives in real estate tax breaks annually from Allegheny County.
The hospital’s former CEO, Jeffrey Romoff, also hauled in almost $18 million in deferred compensation for the 2023 fiscal year, even though he left the position in 2021. His replacement, Leslie Davis, made $11.3 million in 2023, making them both among the highest-paid nonprofit hospital executives, even rivaling for-profit hospital CEOs. Meanwhile, Pittsburgh’s poverty rate is more than 19 percent, significantly higher than the national average of 11 percent.
The University of Pittsburgh Medical Center’s real estate acquisitions have also allowed the hospital giant to acquire a monopolistic position in the local health care market. They are currently facing a class-action lawsuit backed by the Department of Justice alleging the hospital has excessive control over local health care workers, allowing them to suppress wages and impose restrictive conditions like noncompete agreements — which block workers from seeking employment elsewhere.
This isn’t the first time the health care behemoth has faced legal action from state and federal authorities. After a dispute over rates with Highmark Health, a major insurer serving Pittsburgh, the University of Pittsburgh Medical Center cut off patients covered by the insurer from accessing their health care providers. State officials had to step in to negotiate a truce and forge a binding agreement, which the University of Pittsburgh Medical Center was subsequently accused of violating.
An Exemplar
Since taking office in 2022, Mayor Gainey made one of his top priorities clawing back some of the property tax revenue from the University of Pittsburgh Medical Center. The mayor opted to take a more aggressive approach than his predecessors by legally challenging the tax-exempt status of more than fifty University of Pittsburgh Medical Center–owned properties. The bulk of these cases so far have not been successful, and the mayor has received substantial criticism for his heavy-handed tactics and resulting legal fees.
But the mayor’s allies contend that by showing they’re willing to take on powerful actors like the university medical center, these cases have helped their bargaining position for a compromise payment plan that’s being negotiated.
To make up for a lack of tax funding, Gainey met with senior officials from the hospital system in 2024, and according to the mayor, the hospital agreed to pay the city $125 million over the next decade. However, the deal quickly fell apart, and the University of Pittsburgh Medical Center claims they never made such an offer.
Other Pittsburgh-area health networks such as Highmark Health have countered with a smaller proposed payment from the hospital system, contingent on the medical center making contributions to the city for various social services. So far, the University of Pittsburgh Medical Center has refused to make that commitment.
Amid this battle, O’Connor hopped into the mayor’s race hoping to capitalize on the business class’s disgruntlement with Gainey’s tenure.
In addition to contributions from the University of Pittsburgh Medical Center, O’Connor has brought in fundraising hauls from major power brokers across the city. In particular, his candidacy is receiving a boost from local real estate developers, which make up 80 percent of his campaign’s $1 million war chest.
With the University of Pittsburgh Medical Center’s tax status looming in the shadows, the mayoral contest is shaping up as a bellwether in the clash between billion-dollar hospital chains and those who want these so-called charitable institutions to better serve their communities.
“The University of Pittsburgh is not an outlier as much as it is an exemplar,” said Saini. “We live in a society where Big Medicine, Big Hospitals, are really big. . . . It’s wild that our health care dollars that should be spent on taking care of people, fixing fractures, buying medicines, all that kind of stuff are being run like private equity funds.”
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