Not-for-profit hospitals are built, not registered

As I finish up at Catholic Health Australia to pursue another role in the Catholic health sector, I’ve been thinking less about the policy debates of the past two and a half years on funding models, insurance, and regulation, and more about the people who started all this. Not because the policy doesn’t matter, but because it only makes sense once you understand what these hospitals were built to do.

In 1857, five Irish Sisters of Charity opened St Vincent’s in Sydney, free to all but founded especially for the poor. If a few determined people tried to do what those Sisters did today, would they succeed?

And they were not the only ones. In 1885, six Sisters of the Little Company of Mary arrived in Sydney to care for the sick and the dying, starting with a soup kitchen in Kings Cross, and Calvary Health Care grew from there. In 1895, eight Sisters of St John of God arrived in Western Australia to care for typhoid patients on the goldfields, and their successors were still running the country’s last leprosarium in the Kimberley until 1986. In 1906, the Sisters of Mercy opened a 20-bed private hospital in a rented house in Brisbane, treating its fees as a stepping stone to the free public hospital for the poor they actually wanted to build. That was the beginning of the Mater. In 1920, after the influenza pandemic, the Mercy Sisters opened their first Victorian hospital, in Malvern, and Mercy Health began. In 1948 they handed that hospital to ten Cabrini Sisters newly arrived from Italy to care for post-war migrants, and it grew into Cabrini Health.

For close to 170 years, these organisations have stood with communities through epidemics, war, natural disasters and depression, and through the private hardships of illness, frailty and dying. While the religious orders and states differ, the idea is the same – fee-paying work supports the mission, and surpluses go back into the delivery of care. This commitment still runs through the hospitals, aged care homes and community services of Catholic Health Australia members, and it is the reason they measure success by more than the bottom line.

But what I have found hardest to get across in policy debates is that governments tend to treat not-for-profit status as an administrative category, a charity registration, or a line in a funding agreement. While you can register a charity in a few months, you cannot register a mission. Not-for-profit status is the outward form of something that has to be built from the inside, over a long time, by people who decide again and again that the patient in front of them matters more than the margin.

You see the difference most clearly when a hospital keeps providing services like maternity, mental health or palliative care that don’t pay their way, especially in regional areas. On a spreadsheet, every one of these is a loss to be managed out, but in a mission-driven hospital they are part of the job.

Yet, Australian health policy barely registers the distinction. Charitable hospitals receive tax concessions, but the funding rules and insurance arrangements that shape their services day to day are largely ownership-blind. The system quietly relies on mission-driven providers to carry losses nobody else will – it counts on that goodwill without ever counting it.

Even the United States, home of the most expensive and market-driven health system in the world, is learning this. Catholic systems now run close to a fifth of America’s not-for-profit hospitals, and when Massachusetts needed new owners for a group of community hospitals in 2024, it turned to not-for-profits. Researchers at Berkeley found that Catholic owners were more likely than others to keep chaplaincy and charity care going after taking over a hospital. This isn’t to say they avoided cost cutting after a takeover, but the difference was in what they refused to cut.

So why do it? The answer lies largely in Catholic social teaching. Despite the name, you do not need to be Catholic, or religious at all, to see its value. Read plainly, its principles make a pretty good design brief for a health system.

Start with the preferential option for the poor. In policy language it means designing for the person with the least and building up from there. Picture a frail pensioner in a country town with no car and no private cover. Get the system right for her and you will get it right for nearly everyone. Too often we do the reverse, designing for the average metropolitan patient and adjusting later for those left out.

The principle of subsidiarity holds that decisions belong at the lowest level competent to make them. In health, that means a hospital board in Lismore will understand its community better than a national funding formula ever will.

The common good reminds us that a hospital is not simply a business, but as much a part of a town as its school or its water supply. Treat them purely a business and the services that do not pay will always be the first to go. Beneath all of it sits the dignity of the person, the stubborn insistence that a patient is never just a cost to be managed.

So, back to the question I started with: if a few determined people tried to do what those Sisters of Charity did in 1857 today, would they succeed? The honest answer is probably not. What the Sisters started took generations to build, and the organisations carrying it on today could not be recreated overnight. Yet the pressures on these services are growing, and what took generations to build can be lost in a few budget cycles.

So here is what I would ask of you, wherever you sit. If you design funding models, start with the pensioner in the country town rather than the average patient in the city. If you are writing the rules that govern our system, ask whether they can tell the difference between a hospital that stays and one that would leave tomorrow. If you fund health services, remember that some services exist not because they pay, but because someone decided a community should not go without.

Many of the best parts in our health system began with a few people who saw a need and would not wait for permission. What makes these hospitals different took generations to build. It has been a privilege to work alongside the people who keep building it, and I cannot wait to see what they build next.