The Margin Is Thin, the Portfolio Is Not: How Nonprofit...

Here is a fact that surprises almost everyone: a large nonprofit hospital system often makes more money from its investment portfolio than from treating patients. The care is a thin-margin business, a few cents of operating profit on each dollar in a good year and a loss in a bad one. The reserve, invested in the markets, is where the real swing happens. Seven hospital systems filed returns this week, from a San Diego institution to the largest nonprofit health system in the country, and read together they show an industry that keeps the lights on with patient revenue and moves its bottom line with a portfolio. Everything below is from the Form 990s, free at ProPublica.

The tell: Scripps earned four times as much from investing as from operating

Scripps Health, founded in San Diego in 1924 by the philanthropist Ellen Browning Scripps, reported $4.87 billion in revenue and holds $6.03 billion in net assets. In fiscal 2024 its operating income was $206.2 million, a 4.2 percent margin and a genuine turnaround from a large operating loss the year before. But its net income for the year was $958.5 million, more than four times the operating figure, and the difference was investment gains on its reserve portfolio (Becker's Hospital Review). That gap is the whole point. The hospital's job is to run near break-even on care. The portfolio is where the money is actually made or lost, which means a nonprofit hospital's annual result rides on the same markets a pension fund and a retiree ride, the same well again. The executives are paid to run it like a business, and Schedule J shows it: Scripps's chief executive drew about $2.0 million in base salary and a $2.1 million bonus, and Orlando Health's took a $5.4 million bonus on top of $2.2 million in base, the incentive-weighted pay of a corporate chief rather than a charity's director.

Stanford Health Care, the adult-hospital system separate from Stanford University, shows the same structure at larger scale: $8.05 billion in revenue, $7.47 billion in net assets, an operating margin around 5 percent, and roughly $5.8 billion in unrestricted cash, about 200 days of it, which is what earns it an AA-minus credit rating and what sits in the markets throwing off investment income (Stanford Health Care ratings). A hospital's reserve is not idle. It is a war chest measured in days of cash and invested for return, and it is the reason a 5 percent operating margin can turn into a very different bottom line.

Growth by acquisition

Two of these systems show the other force reshaping nonprofit hospitals: consolidation. Orlando Health reported $4.83 billion in revenue as a single filing entity but has grown into a roughly $10 billion system by buying, taking Tenet's Brookwood Baptist hospitals in Alabama in its first out-of-state move and adding Florida hospitals from the collapsed Steward chain, funded partly with a $1.2 billion bond sale (Becker's). Tampa General Hospital, whose legal name is the Florida Health Sciences Center, reported $3.16 billion and $2.38 billion in net assets, and under a decade of one chief executive grew from a roughly $1.2 billion hospital into a $4.5 billion academic system, buying the Bravera hospitals along the way (Tampa General). When you read a single hospital's 990, you are usually reading one entity inside a much larger system, and the systems are getting larger by absorbing each other.

The independents, and one dramatic divorce

Hoag Memorial Hospital Presbyterian, in Newport Beach, reported $2.12 billion in revenue and holds $3.37 billion in net assets, and its recent history is the sharpest governance story in the group. In 2020 Hoag sued to exit its affiliation with the Providence health system, and after the California attorney general declined to object, the disaffiliation was finalized in early 2022, with Hoag agreeing to expand reproductive and other services as a condition (Healthcare Finance). Now independent, it is spending about $1 billion on a new Irvine campus, backed by a $100 million commitment from a single family foundation. Baylor University Medical Center in Dallas, meanwhile, reported $2.32 billion in revenue and $4.41 billion in net assets as the near-debt-free flagship of Baylor Scott and White Health, a $17 billion system, and it carries the same name as, but operates separately from, Baylor University.

The two that get their own posts

Two of these institutions are too unusual for a paragraph. Shriners Children's is not really a hospital company at all but a $10.7 billion endowment that happens to run pediatric hospitals and give the care away, funding free treatment from its investment income rather than from billing. And Kaiser Permanente is the giant that swallows the whole category: its hospital arm alone holds $52 billion in net assets and its health-plan arm books $82 billion in revenue, and its annual profit or loss is decided, more than by anything in its clinics, by what its enormous investment portfolio did that year.

What counts as charity, and what does not

There is one more number on these returns that decides whether any of this deserves to be tax-exempt at all, and it lives on Schedule H, the schedule only hospitals file. It asks what each system spent on community benefit, and it splits the answer in a way worth seeing. The narrow line is financial assistance, free or discounted care for patients who cannot pay, and at most of these systems it is startlingly small. Scripps reported charity care of $17.8 million, 0.39 percent of its expenses. Stanford Health Care reported $25.2 million, 0.34 percent. Hoag reported $12.2 million, 0.64 percent. Under a penny on the dollar of free care, at institutions sitting on billions in reserves.

The broader line is total community benefit, which folds in the unreimbursed cost of treating Medicaid patients, the cost of training doctors, subsidized services, and research, and it is the figure hospitals point to when the exemption is questioned. By that fuller measure the same systems look far more generous: Scripps 5.19 percent, Stanford Health 10.46 percent, Tampa General 10.02 percent, Orlando Health 13.41 percent, Hoag 6.27 percent, and Baylor University Medical Center 4.68 percent. Both numbers are true, and both sit on the same page of the same return. The gap between them, the half a percent of pure charity care and the five to thirteen percent of everything a hospital may count as community benefit, is the entire national argument over whether nonprofit hospitals earn the tax break their reserves quietly compound inside. The two systems that get their own posts sit at the extremes of it: Kaiser reported $2.06 billion of total community benefit, the largest sum in this group and still only 6.09 percent of its expenses, while Shriners, which genuinely gives its care away, reported 58.52 percent.

The sharpest way to see what that exemption is worth is to look at the hospital company that does not get it. HCA Healthcare, the largest for-profit hospital operator in the country, ran the same business at greater scale in its most recent fiscal year: about $75.6 billion in revenue, several billion dollars in profit, and $2.05 billion recognized in income tax, after which its earnings flow to shareholders (HCA via SEC EDGAR). The nonprofit systems in this post earn comparable sums, pay no income tax on them, and in exchange report the community benefit on Schedule H that this section just walked through. That is the bargain in a single comparison: the for-profit hospital sends the Treasury two billion dollars and its profit to investors, while the nonprofit keeps the tax, keeps the surplus in its portfolio, and books community benefit instead. Whether the public gets the better end of the second deal is precisely what the charity-care numbers are argued over.

The one finding under the whole ward

Nonprofit hospitals are where this series' thesis is easiest to miss and most important to see. On the surface they run on patient care, and the operating margins are so thin that a bad flu season or a labor contract can erase them. Underneath, they are large investors. They hold reserves measured in months of cash, invested in the same public and private markets as every endowment and pension in these posts, and in a good market year those reserves produce more income than the hospitals earn treating patients, while in a bad year they produce the loss. That is not a criticism; a hospital that did not keep a reserve would be one bad quarter from insolvency, and the reserve has to be invested to keep its value. But it means the financial health of the institution that treats you when you are sick rises and falls with the stock market, quietly, on a line most people never read. The margin is thin. The portfolio is not. And the portfolio is where the story is.

Fact-check notes and sources

All revenue and net-asset figures are from each system's most recent IRS Form 990 via ProPublica's Nonprofit Explorer: Scripps Health (EIN 95-1684089, revenue $4.87B, net assets $6.03B), Stanford Health Care (EIN 94-6174066, revenue $8.05B, net assets $7.47B), Orlando Health (EIN 59-1726273, entity revenue $4.83B), Tampa General / Florida Health Sciences Center (EIN 59-3458145, revenue $3.16B, net assets $2.38B), Hoag (EIN 95-1643327, revenue $2.12B, net assets $3.37B), and Baylor University Medical Center (EIN 75-1837454, revenue $2.32B, net assets $4.41B).
Scripps's $206.2 million operating income against $958.5 million net income for fiscal 2024: Becker's Hospital Review; the 1924 founding by Ellen Browning Scripps per Scripps.
Stanford Health Care's roughly $5.8 billion unrestricted cash, about 200 days on hand, and AA-minus rating: Stanford Health Care.
Orlando Health's growth to a roughly $10 billion system via the Brookwood Baptist and Steward acquisitions and a $1.2 billion bond sale: Becker's Hospital Review. Tampa General's growth under John Couris: Tampa General.
Hoag's 2022 disaffiliation from Providence and its roughly $1 billion Irvine expansion: Healthcare Finance News. Baylor University Medical Center as the flagship of the $17 billion Baylor Scott and White Health: Becker's Hospital Review.
The chief-executive compensation splits (Scripps: about $2.0 million base and $2.1 million bonus; Orlando Health: about $2.2 million base and a $5.4 million bonus): from each system's Form 990 Schedule J and Part VII, via the ProPublica links above.
The community-benefit figures (charity care and total community benefit as net cost and as a percentage of total expense: Scripps $17.8M / 0.39% and $235.0M / 5.19%; Stanford Health $25.2M / 0.34% and $786.8M / 10.46%; Orlando Health $137.3M / 3.64% and $505.5M / 13.41%; Tampa General $48.1M / 1.67% and $289.1M / 10.02%; Hoag $12.2M / 0.64% and $118.5M / 6.27%; Baylor University Medical Center $38.1M / 1.86% and $95.7M / 4.68%): read from each system's Form 990, Schedule H, Part I, line 7a (financial assistance at cost) and line 7k (total community benefit), via the ProPublica links above. Kaiser's $835.5M / 2.47% and $2.06B / 6.09%, and Shriners' 23.16% and 58.52%, are from the same schedule of their respective returns.
The HCA comparison (HCA Healthcare's roughly $75.6 billion in fiscal 2025 revenue, several billion dollars in net income, and $2.05 billion in income tax expense): read from HCA Healthcare's Form 10-K financial data on SEC EDGAR (data.sec.gov, CIK 0000860730). HCA is a for-profit, taxable corporation, so it files audited financials with the SEC rather than a Form 990.

This post is informational, not financial or medical advice. All figures are reproduced from public filings and the public record. Organizations and individuals are discussed from the public record as nominative fair use, with no affiliation implied and nothing endorsed by any of them.

The Margin Is Thin, the Portfolio Is Not: How Nonprofit Hospitals Actually Make Money