Donations, once a hospital mainstay, account for less than 1 percent of Graduate's revenue now. Most of its money comes from fees the hospital charges, just like any commercial business.
And there is relatively little charity. Less than 3 percent of its $120 million budget in 1990 went to providing free medical treatment.
Graduate is not unique. It is a case history of how hundreds of nonprofit hospitals across America, using their tax subsidies, have been transformed
from small charitable institutions into modern medical empires.
At a cost of more than $8 billion a year in lost federal and state taxes.
That tax subsidy, plus others, have spurred the phenomenal growth in nonprofit hospitals. As a group, they tripled in size during the 1980s.
Hospitals now are the single largest segment of the $850 billion tax-free economy, accounting for nearly one-quarter of all assets. Since 1950, their assets have grown tenfold, from $19 billion to $195 billion, after adjusting for inflation.
Because they pay no taxes, many hospitals have accumulated huge profits and used them to build new hospital wings, to buy expensive equipment and to diversify into other businesses.
That has led to overbuilding and overstaffing of hospitals and has helped push health-care costs out of sight. On any given night, one-third of all hospital beds in America are empty.
In the last two decades, the average cost of a hospital stay has gone from $615 in 1970 to $1,900 in 1980 to $5,000 in 1990 - a rise of 713 percent. That was three times the rate of inflation.
In the same period, the revenue of nonprofit hospitals increased from about $14 billion to more than $150 billion, or four times the rate of inflation.
Despite nonprofit hospitals' tax-exempt status, their charges to patients are no lower than those at for-profit hospitals.
