Partly because of salaries and benefits nearly three times the provincial minimum wage of $10, the eatery in the St. John's Health Sciences Center lost $260,000 last year, the National Post reported.
It was the fourth fiscal loss for the coffee shop that was put in place in 1995 to help raise money for the hospital to hire several nurses, the Toronto Star said.
While the shop is physically operated by a private contractor, its employees are paid as public employees, the reports said.
The hospital's operator, Eastern Health, said it will turn full control of payroll over to the contractor.
The average Tim Hortons franchise owner reportedly makes $265,000 in profits annually, and staff generally earn minimum wage or slightly above, the Post said.
Lloyd Matthews, Newfoundland's health minister when the shop opened, told the Post he's glad the issue came to light.
"Somehow it became public employees running a doughnut shop," he said. "It brings us all home to the issue of waste in healthcare."