When Billion-Dollar Non-Profits Stop Looking Like Charities

Authored by Jeff Patch via RealClearMarkets,

AltaMed Health Services reported $1.72 billion in revenue in 2024, which is more than many publicly traded healthcare companies. Yet unlike a public corporation, the nonprofit entity answers to no shareholders, enjoys broad tax exemptions, and derives much of its revenue from taxpayer-supported healthcare programs.

AltaMed also reported $1.66 billion in assets and its revenues exceeded expenses by $68.4 million. It operates more than 70 clinics, employs roughly 5,000 people, and serves more than 700,000 patients throughout Southern California, making it one of the nation’s largest federally qualified health center (FQHC) systems.

But AltaMed’s extraordinary growth raises another question that extends far beyond Southern California: What happens when a nonprofit grows into a multibillion-dollar enterprise while retaining the governance structure of a traditional charity?

That question has become increasingly relevant as individual nonprofit hospital systems, universities, and other charitable organizations now control hundreds of billions of dollars in assets while benefiting from tax exemptions, government reimbursements, tax-deductible donations, and public financing. Their primary accountability mechanism is a board of directors charged with ensuring that charitable resources remain devoted to public benefit rather than private profits.

Since 2001, AltaMed has paid more than $32 million in compensation to its CEO, Castulo de la Rocha, his wife Zoila Escobar, and one of their sons – which is significantly higher than most of its peer FQHCs. For instance, the chief executives of Family Health Centers of San Diego, Family HealthCare Network, and Comprehensive Community Health Centers each earned substantially less than de la Rocha in 2024 despite overseeing similarly large healthcare organizations.

Following scrutiny of excessive executive pay more than a decade ago, AltaMed adopted a split-dollar life insurance loan program designed to help retain selected executives. The program has provided substantial loans to a small group of senior leaders to finance life insurance policies. Split-dollar arrangements are technically legal, although federal officials have cautioned that similar structures have been used improperly in certain tax-avoidance schemes.

Executive compensation is only one measure of nonprofit governance. Equally important is how charitable organizations deploy their resources and whether those expenditures advance the mission for which they receive tax-exempt status.

Over the past two decades, AltaMed has built one of the country’s most prominent collections of Chicano and Latino art. It says the collection supports its “Art as a Holistic Approach to Healthcare” initiative, and that artwork displayed throughout its clinics creates a more welcoming and therapeutic environment for patients.

However, AltaMed’s involvement in the arts extends far beyond decorating clinic walls – it owns a collection of approximately 4,000 works of Chicano, Mexican, and Latin American art, the value of which exceeds $6 million. It has spent as much as $2 million on art-related activities outside the United States in places like Mexico City, Rome, Berlin, and Madrid. More recently, it has supported plans for a Museum of Chicano and Mexican Art in downtown Los Angeles, spending at least $150,000 on lobbying related to the proposal.

The organization has unquestionably expanded access to healthcare for hundreds of thousands of Californians. But AltaMed’s growing role as an arts patron raises legitimate questions about how closely those activities are connected to its charitable healthcare mission.

That is a challenge that extends well beyond AltaMed. Nonprofit executives regularly oversee budgets larger than many cities, yet they remain governed by rules and oversight mechanisms developed for a much smaller nonprofit sector.

Congress created the tax-exempt status because charitable organizations provide public benefits that markets alone may not deliver. That public trust depends on confidence that charitable assets are being used primarily to advance charitable purposes, and not the financial interests of insiders. As nonprofits continue to grow in both size and complexity, policymakers should ask whether the accountability standards governing billion-dollar charities have kept pace with the institutions they now oversee.

Jeff Patch is an Iowa-based writer focused on legal, regulatory and political challenges that impact businesses and markets. Patch is a former Des Moines Register correspondent and Politico staff writer.