Not-for-profit hospitals providing less charity care; why not lower prices?

We’ve complained a lot, at Doctors for Truth in Health Care, about the disconnect between the charitable mission of large, urban, not-for-profit hospital systems and the profit-maximizing behavior of its executives and administrators. Now comes a report, from 2013, showing that seven of the top 10 most profitable hospitals in the United States are nonprofits, each netting more than $150 million for patient care activities.

Meanwhile, the value of tax exemptions at nonprofit hospitals has doubled in the past decade. Clearly, things have changed since the hospitals’ origin, when, in many cases, nuns served the poor and indigent.

Oregon nonprofits demonstrate the trend

SOURCE: Oregon Health Authority
SOURCE: Oregon Health Authority

Distressingly, the situation is becoming worse. In the 31 states that expanded Medicaid following the passage of the Affordable Care Act, many patients who were formerly uninsured are now paying customers. Take Oregon, for example. In the past two years, the number of Oregonians on Medicaid jumped from 626,000 to 1,056,000. Today, only 6 percent of Oregonians are without insurance. Meanwhile, the amount of care for which Oregon hospitals get no compensation has declined 65 percent over the past two years [see chart].

Willamette Week explains what’s happening:

Hospitals directly employ 60,000 people in Oregon and, according to the hospital association, support twice that many jobs indirectly. From humble beginnings, they have evolved into large, complex businesses and are the biggest part of health care, the state’s fastest-growing industry.

Because they now have more paying customers, and they don’t pay taxes to government or dividends to shareholders, Oregon’s nonprofit hospitals are piling up money faster than they can spend it.

What hospitals should do with their excess profits

I have a suggestion for where that money should go. And it’s not on salaries or new buildings.

I think the big, not-for-profit hospitals—particularly in Medicaid expansion states—should double their expenditures on community benefit. Or have their tax-exempt status called into question.

Better yet, why not just lower prices? Hospital prices are, by far, the largest reason for the cost of health care in America being the highest in the world. Let’s bring that down.

Ultimately, things probably won’t change without public outcry. But maybe this new data showing escalating hospital profits and plummeting charity care might prompt some squawking.

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