A physician has written a commentary regarding non-profit hospitals that I whole-heartedly agree with and that echoes previous points I have made regarding the impact of these systems and the compensation of their executives on health spending. (AMJMED Article) He notes that seven of the most profitable hospitals in the country are “non-profits”, all making well over $150 million a year in 2013. He correctly points out the federal and state tax definitions, and the state non-profit law definition, of what is a not-for-profit entity are absurd, allowing this huge profit run-up. And of course the backdrop that allows these kinds of profits to begin with is the ludicrously lax antitrust enforcement that has allowed these systems to attain substantial market power.
The physician goes on to point out that these health systems spend very little on actual charity or free care to those who can’t afford it, which is simply a horrendous breach of what should be their mission. And this is exacerbated by the grotesque executive compensation at non-profit systems–there are 30 that pay the chief executive over $4 million a year. Sure it is a hard job, but these are supposed to be non-profits and if you work at one, you shouldn’t ask for or receive this kind of compensation. These figures are from 2011 and 2012 and I suspect they have gotten even more egregious. I agree with this doctor’s comments and I agree that the remedy is to explicitly limit compensation in allegedly non-profit hospitals and to force them to disgorge their profits by rebating to payers or patients. We also need to figure out how to keep them from putting granite and teak in their buildings and engaging in other excessive spending practices. At a time when it is very hard to identify actions that would meaningful reduce spending and spending growth, this one could save tens of billions of dollars, by reducing charges and compensation.