Ethics Scenario #115: Piperville Community Hospital

115. Piperville Community Hospital, a nonprofit, 501(c)(3)tax-exempt organization, has always been entrepreneurial in finding sources of revenue to respond to increasing cuts in government reimbursements, and competition from nearly health institutions. Recently, a private laundry service in the community announced that it was closing its doors permanently, and laying off 22 full-time workers, because the hospital was undercutting its business by offering laundry services at a cheaper price; taking advantage of its access to private capital; its exemption from federal, state and local taxes; and its ability to access volunteers. The board is considering launching a similar unrelated business--offering a health club with state of the art Nautilus equipment to compete head-to-head with a private health club that has recently located within two blocks of the hospital’s campus. The hospital routinely files a 990-T and pays thousands of dollars in taxes on its unrelated business income.

a. Is the hospital acting ethically by competing for the business of for-profit organizations, even when the operations are outside of the mission of the hospital?