Nonprofits make up 58% of all our hospitals. The Mayo Clinics, Cleveland Clinics, Stanford and the University of Pittsburgh Medical Center are all examples of nonprofit hospitals. They are exempted from having to pay property taxes, federal or state income taxes, and sales taxes. That massive financial benefit is not a give-away. It’s a trade off requiring them to provide charitable benefits equal to the tax savings they receive. But everyone knows that they don’t.
They get much more than they give. The difference between the benefits received and the charity they dispense is called the “fair share deficit”. The Lown Institute found that the combined “fair share deficit” for nonprofit hospital systems exceeded $18 billion in 2019, an amount more than enough to put an end to homelessness.
The IRS defines charity as “free or discounted health services provided to persons who meet the organization’s eligibility criteria for financial assistance and are unable to pay for all or a portion of the services”. The nonprofits prefer their own definition. They claim that accepting Medicaid and Medicare fees is by itself an act of charity and consider any paper loss as charity and measure it by difference between their jacked-up fees and the fees from government programs . States make up their own rules.
it should be obvious to all that the amount they claim is entirely at their discretion since they are free to manipulate the size of their shortfalls simply by jacking up their arbitrary fees as high as they want. They even claim some salaries are part of their charitable activities. Clearly, oversight is necessary.
. The Affordable Care Act has created fewer uninsured patients which has greatly reduced the amount of uncompensated care. Further, hospitals get additional revenue from the government if they demonstrate that they serve a disproportionate number of uninsured patients. Their nonprofit status also affords them to receive donations as well as immunity from the FTC, our watchdog preventing monopolistic anticompetitive mergers and acquisitions. That has to change!
Providence Health and Services, founded by the Sisters of Providence in 1856, claims to be “steadfast in serving all, especially those who are poor and vulnerable.” That was their original intent. Since then they have managed to become one of the largest nonprofit health systems in the country, with 51 hospitals across seven states and more than 900 clinics. It pays its CEO more than $10M a year. Its revenue in 2021 exceeded $27 billion and has reserves of $10 billion, enough to run its own venture capital fund, Providence Venture. The latter currently manages $300M. .
Providence is a financial powerhouse. but They’re not overly charitable. Not only do they spend less than 1% its expenses on charity care ( the national average for nonprofits is 2.3%), Their tax exempt status allowed them to avoid $1.8B each year. They got into trouble when they went all out trying to convert needy patients into sources of revenue. By training their entire staff to get their patients to cough up payments, they created more than $73 million of ill-begotten debt for patients whose care should be free.
When the NYT September 24 2022 article disclosed these facts, Providence’s CFO announced it would reimburse about 760 Medicaid insured patients whose accounts were sent for collection. They called it an “unintended error”. They still have to respond to a lawsuit filed by Washington state’s attorney general,
The Mayo Clinic is no better. They spent 0.34% of its expenses on charity care in 2021. They also interpret charity to mean “unpaid portions of Medicaid and indigent care”. Nor is the University of Pittsburgh Medical Center, Pennsylvania’s largest employer with international interests and valued at $10B. Their CEO has access to “a private chef and dining room, chauffeur and private jet”. They just bought their fourth hospital in Ireland.
It’s getting harder and harder to tell non-profits from for-profits. The two provide comparable benefits to their communities and treat comparable numbers of indigent patients. The two offer similar compensation to their CEOs and other executives. A study reported in the Journal of General Internal Medicine showed that no difference could be found between non-profits and for-profits in the percent of total expenses devoted to charity care.
Let’s face it. Nonprofits don’t provide enough charity care to justify their tax-exempt status. There’s no reason to perpetuate the myth. The true burden of treating the poor falls to the public hospitals not the nonprofits.
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