Nonprofit hospitals have faced intense scrutiny in recent years, with attention focused on billion-dollar revenue figures, high-profile capital projects and whether tax-exempt systems provide sufficient community benefit.
For Carilion Clinic, a seven-hospital system headquartered in Roanoke, Va., that pressure is not abstract. It is the operating reality. The system typically operates on a 2% to 4% operating margin — modest by any standard, and is often misread by members of the public who assume “nonprofit” means no profit at all, according to Tony Seupaul, MD, chief physician executive and president of physicians at Carilion Clinic.
Unlike for-profit systems, which are beholden to their shareholders, nonprofit hospitals often operate on tight margins, particularly in markets like Carilion Clinic’s, where about two-thirds of patients are covered by Medicare or Medicaid.
“We’re doing the work that for-profit systems may not necessarily want to do,” Dr. Seupaul said.
The contrast with for-profit healthcare is stark.
Nashville, Tenn.-based HCA Healthcare, the largest for-profit system in the country, reported a net income of $6.8 billion (9% margin) in 2025, up from $5.8 billion (8.2% margin) in 2024. A New Haven, Conn.-based Yale School of Medicine study published last year found that 92 large U.S. healthcare companies spent 95% of net income on shareholder payouts over the past 20 years, totaling $2.6 trillion. At Carilion, that math looks totally different.
“Our stockholders are the members of our community. Our board is a fiduciary to the community, not to us,” Dr. Seupaul said. “We answer to our board; very different environment.”
Margin-negative, mission-critical
The clearest test of a nonprofit’s commitment is whether it sustains services that may never turn a profit.
For Carilion Clinic, that means supporting services such as behavioral health and maternity care across largely rural, access-challenged geographies. These services are supported through careful stewardship of limited resources, alongside investments in education and research that Dr. Seupaul describes as essential.
“We work hard to be efficient and thoughtful about how we invest those limited resources to remain sustainable,” he said. “We not only support clinical programs, but also education within our system. We invest in research because we want to support the workforce of the future — not just for Carilion, but for health systems across the country and for our community here in Roanoke and throughout the region.
“We also invest in new knowledge and cutting-edge technologies, which we see as critical to our success and the future of our system and region. So, yes, it’s a strain on a thin margin to do those things, but that’s what we do, and we’ve done it for a very long time.”
That governance stance drives discipline and a long-term view of community impact. It is one that extends well beyond the IRS Form 990 Schedule H that critics and policymakers typically cite as the primary measure of community benefit.
A study published Feb. 8 in Frontiers in Public Health found that IRS Form 990 Schedule H — the primary tool used to assess nonprofit hospitals’ community contributions — captures only a fraction of what these institutions actually provide, omitting roles such as anchor institution, workforce developer and cross-sector collaborator. The authors argue that without more comprehensive reporting standards, policymakers and the public are working from an incomplete picture when evaluating whether nonprofit hospitals justify their tax-exempt status.
“If that is the sole measure of how a nonprofit health system is engaged in the community, then we’re missing out on the full story,” Dr. Seupaul said.
Carilion Clinic’s broader definition of community benefit spans education, food security, housing and workforce development, reflecting the social determinants of health that now dominate policy conversations, according to Dr. Seupaul.
A different kind of accountability
Two recent investments demonstrate where that mission shows up most concretely.
In the neighborhood of northwest Roanoke — a historically underserved community — Carilion Clinic partnered with Goodwill Industries of the Valley, the city of Roanoke and other organizations to build Melrose Plaza, a mixed-use complex anchored by a grocery store, a health center, an adult education center and a library. At the partially vacant Tanglewood Mall site in Roanoke County, the system transformed a vacant national retailer space into a large multidisciplinary outpatient pediatric facility spanning primary care to pediatric neurosurgery, catalyzing a broader commercial revival in the process.
These projects highlight different ways Carilion is reinvesting in its community long-term.
As the largest private employer west of Richmond, Carilion Clinic also carries an outsized responsibility for the regional economy. The system has built internal career-ladder programs that allow entry-level employees to advance into nursing and other clinical roles, and partners with local K-12 schools, community colleges and universities to build the regional healthcare workforce pipeline.
The stakes in getting this model right have rarely been higher. With about one-third of nonprofit hospitals nationally operating at a loss — particularly those in rural areas or with a high Medicaid payer mix — the margin for error is thin.
These hospitals are facing difficult decisions about whether to cut or sustain certain services as Medicaid funding reductions take effect later this year, while the expiration of the ACA’s premium tax credits is expected to increase uncompensated care and further strain capacity — particularly in emergency departments.
“That’s a critical consideration,” Rob Allen, president and CEO of Salt Lake City-based Intermountain Health, told Becker’s. “The nonprofit model carries with it a hope and a promise. The hope is that we’ll be here when the community needs care, and the promise is that when someone seeks access, they’ll be able to get it.”
Dr. Seupaul is candid about what is at stake. Cuts to Medicaid, 340B and tax-exempt status are not abstract policy questions; they are decisions with direct consequences for the services Carilion Clinic and other nonprofit systems sustain.
“I think of a few core principles that can help ensure those simple messages resonate with the people who need to hear them — whether that’s the general public or those in legislative positions who need to understand the impact if funding evaporates for certain programs, particularly Medicaid,” Dr. Seupaul said. “Most nonprofits have a very heavy government payer mix — about two-thirds government payers — compared to for-profits, which are closer to 50/50.
Our business model is centered on caring for our community and investing accordingly in its long-term health.”
His message to policymakers and the public is deliberately simple, even if the execution is not. Nonprofit health systems are not businesses that happen to have a charitable wing. They are organizations built around a different kind of responsibility, and answer to a fundamentally different bottom line.
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