Private colleges have always practiced "holistic" admissions. It basically means that they take whoever they want for whatever reason. Nothing wrong with that, it seems to me. It's their school. High test scores definitely indicate academic potential, but other qualities and talents are interesting and valuable too. The elite schools look for a "flag" amongst all of their most highly qualified applicants. They can't take them all. Money is one of the flags but there are many others.
When it comes to taxpayer-supported higher ed, it gets much more complicated: The truth about 'holistic' college admissions