Mission or Margin: How Nonprofits Are Becoming Private Equity in Disguise

The Betrayal of the Nonprofit Promise

Fifty years ago, the American nonprofit sector was anchored by trust. Community hospitals, faith-based charities, and behavioral health providers existed to fill the gaps left by markets and government alike. But in 2025, a darker transformation is unfolding.

Large nonprofit health systems are increasingly behaving like private equity (PE) firms—consolidating power, centralizing control, and prioritizing revenue over community service. They are borrowing Wall Street’s language of “optimization” and “synergy” while quietly absorbing smaller providers, cutting unprofitable services, and raising capital through debt tied to public dollars.

This isn’t a fringe problem. It’s a structural evolution—one that blurs the line between mission and margin, between charity and commerce. And it’s reshaping the nonprofit landscape from the inside out.

Private Equity’s Growing Shadow in Health Care

Private equity’s footprint in health care has exploded. By 2025, PE firms will control vast swaths of hospitals, nursing homes, behavioral health facilities, and even hospice networks. According to Health Affairs, private equity ownership is consistently linked to higher costs, lower staffing levels, and rising turnover across the care continuumpharmaceuticals-private-equity-…vaccine-economics-private-equit….

Recent studies show that PE-backed hospices report the highest profits and the lowest spending on direct patient care—particularly in nursing services—among their nonprofit or publicly traded peers. Other work has found that PE-acquired physician practices, such as ophthalmology and cardiology groups, experience significant spikes in physician turnover within a year of acquisition.

The formula is simple: acquire, consolidate, and extract value. Patients, staff, and communities become variables in a financial equation.

What’s more alarming is that many nonprofits—legally exempt from taxes and shielded by charitable status—are now adopting the same strategies, but without the investor scrutiny that usually accompanies PE deals. They’re importing the PE mindset into mission-driven systems built on public trust.

From Public Good to Portfolio Management

The transformation isn’t accidental. It’s part of a broader convergence between nonprofit and for-profit sectors that scholars began warning about nearly two decades ago. In their landmark study Non-Profit and For-Profit Convergence (Ramirez & Janiga, 2009), researchers documented how nonprofits were increasingly mirroring private-sector decision-making in four areas: money, management, mission maximization, and metrics.

At the time, the trend seemed mostly benign—nonprofits were professionalizing, adopting modern management tools, and experimenting with earned income. But the seeds of today’s crisis were already there. Ramirez and Janiga noted that nonprofits were taking on more debt, holding fewer reserves, and scaling through mergers and acquisitions, all signs of creeping financialization.

Fast forward to 2025, and the warnings have come to fruition. Large nonprofit holding companies are using the tools of private equity—bond issuances, debt-leveraged growth, and aggressive consolidation—but cloaked in the legitimacy of the charitable sector.

Case Study: The Nonprofit That Acts Like a PE Firm

In recent years, a Pennsylvania-based nonprofit holding company has quietly built an empire across behavioral health, disability services, and housing. Its public mission emphasizes “continuity and sustainability” for struggling community providers. But its tactics mirror Wall Street.

Acquisition of distressed assets: The company targets underfunded or unstable nonprofits and absorbs them into a centralized system. Formerly independent organizations lose autonomy as local boards are dissolved and decision-making shifts to distant corporate offices.

Debt-fueled growth: In December 2024, the company issued a $176 million bond, collateralized by future Medicaid reimbursements and state behavioral health contracts. This maneuver—typical of leveraged buyouts—effectively transforms public dollars into financial instruments for speculative expansion.

Centralized operations, local disempowerment: HR, finance, and IT functions are consolidated. While efficiency improves on paper, staff report burnout, turnover, and loss of mission identity. Local leaders, once accountable to their communities, now answer to remote executives.

Governance without voice: Board members have been replaced through “unanimous consent” resolutions, avoiding open meetings or public oversight. Communities that once held a seat at the table now receive press releases instead of participation.

This is private equity logic without private equity accountability—a hybrid model that extracts public value while remaining legally nonprofit.

Debt as the New Philanthropy

Historically, nonprofits grew through philanthropy, grants, or modest operating surpluses. But as the Health Affairs editorial board noted in 2025, bond-financed growth is becoming the new norm for nonprofit systems. These organizations raise millions using their nonprofit status and government contracts as collateral, with little transparency about where the money goes.

In effect, public reimbursements meant to fund care are now underwriting expansion. This is not illegal—but it represents a moral inversion. Instead of channeling capital toward community benefit, nonprofits are leveraging taxpayer-backed assets to fund empire-building.

As one policy analyst put it: “It’s a shadow version of the leveraged buyout. Except the collateral isn’t a factory or a hotel—it’s people’s Medicaid coverage.”

Why It’s Legal—and Why That’s the Problem

None of this technically violates nonprofit law. Boards can centralize. Bonds can be issued. Services can be “realigned.” Yet these tactics violate the spirit of the nonprofit covenant: that organizations granted tax-exempt status exist to serve the public good, not private ambition.

As legal scholar Brendan Ballou argues in Plunder, PE firms have perfected operating in the gray zones of regulation. Nonprofits are now doing the same—exploiting gaps between legality and legitimacy.

Unlike corporations, nonprofits lack external accountability mechanisms. They have no shareholders, no stock price, and often no independent board oversight. When leaders pursue private gain through salaries, consulting fees, or insider contracts, there’s little recourse short of scandal or state investigation.

This “pseudo-distribution” model allows private enrichment under a nonprofit label—what one former regulator called “profit-taking in slow motion.”

A System Built on Silence

The most insidious element of this transformation is its invisibility. PE-style nonprofits rarely announce themselves as such. Their language is sterile and corporate: “integration,” “alignment,” “efficiency.” Their decisions—clinic closures, leadership swaps, mergers—are buried in board minutes or framed as strategic necessity.

But the consequences are visible on the ground:

• Community disempowerment, as local boards lose authority.
• Service erosion, as unprofitable programs like behavioral health or rural care are cut.
• Staff burnout, as centralized management increases caseloads.
• Public confusion, as once-trusted nonprofits become indistinguishable from corporations.

In 2025, Health Affairs reported that United Way, the Boston Foundation, and other major intermediaries are trying to build performance-based funding models that emphasize transparency and measurable social outcomes. Yet these efforts lag behind the scale and speed of consolidation already underway.

Early Warning Signs of Mission Drift

How can communities and regulators detect when a nonprofit crosses the line from mission-driven to margin-driven? Experts point to several telltale signs:

• Sudden governance changes—board replacements, closed-door meetings, or decisions made by unanimous consent.
• Rapid acquisition of distressed nonprofits without clear sustainability plans.
• Large bond issuances backed by public contracts, with little transparency about fund allocation.
• Service “realignment” that disproportionately cuts low-revenue programs.
• Corporate language creep—talk of “portfolio performance” and “synergies” instead of care or equity.
• NDAs and whistleblower suppression, especially when paired with rising staff turnover.

None of these actions are illegal. But together, they signal a deeper betrayal—the transformation of the nonprofit from steward of community trust into agent of financial expansion.

Toward a New Accountability Framework

If we want to preserve the integrity of the nonprofit model, reform must come from both inside and outside the system.

1. Public Oversight with Teeth

States should follow New York’s lead in requiring health equity impact assessments before any nonprofit merger, closure, or acquisition. These reports should quantify the impact of decisions on access to care, particularly for low-income and marginalized communities.

2. Board Reform

Any nonprofit receiving public dollars should include community representatives on its board, with voting power—not just advisory roles. Diversity mandates must go beyond tokenism to ensure affected populations have a say in governance.

3. Fiscal Transparency

IRS rules on executive compensation and conflict-of-interest disclosures need updating for the era of financialized nonprofits. Public dashboards should display key metrics—debt load, service closures, equity impact—just as public companies disclose quarterly results.

4. Funding Guardrails

Philanthropic and government funders must require mission-fidelity audits to ensure that growth aligns with community benefit rather than administrative expansion.

5. Empower Watchdogs

Independent coalitions—journalists, advocacy groups, unions—need funding to monitor PE-like behavior in the nonprofit sector. Without external scrutiny, self-regulation will remain a hollow promise.

Reclaiming the Nonprofit Ethic

The nonprofit sector was built on a simple premise: that some things—care, dignity, community health—should not be left to the market. But when nonprofits adopt private equity’s methods without its accountability, they undermine the very rationale for their existence.

We are witnessing a slow-motion privatization of the public good. Bond by bond, merger by merger, the nonprofit promise is being mortgaged for growth.

If we allow this trajectory to continue unchecked, the next generation will inherit a nonprofit landscape indistinguishable from the corporations it was meant to balance.

The path forward is not nostalgia but clarity: a reassertion that nonprofit must mean something more than non-dividend. It must mean service before scale, transparency before ambition, and accountability before expansion.

The choice before us is stark. Either we reclaim the nonprofit ethic now—or we watch it quietly collapse under the weight of its own borrowed debt.