Skip to main content

Hospitals, Profits and Doing Good

By July 12, 2021Commentary

If you are a for-profit entity, you are supposed to make money and that is fine.  If you are a non-profit organization, you should be focused on providing services at as low a cost as possible, consistent with adequate quality.  In the realm of health care, most large hospital systems, which now control the vast majority of all care in most urban areas, are non-profits, but in name only.  They behave just like a for-profit entity or worse.  They pay their executives truly exorbitant compensation, millions of dollars a year.  They accumulate market power and use it to raise prices far above their costs.  They waste money on marketing to push their services and build their reputations.  And they often don’t do squat for the communities they are supposed to serve, which is reflected again in a report from the Lown Institute.  (LI Report)  Now that group is a far-left wing think tank whose thoughts are that everything should be free, but their report is correct and points out the ongoing abuse of non-profit status by these large health systems.

The report calculates which systems are providing adequate benefits to the community in the form of charity care and other services.  Overall 72% of hospitals aren’t putting back what they should and the largest deficits are in some of the most prestigious systems, like Mass General, NYU, Cleveland Clinic, Vanderbilt and Cedars-Sinai.  Minnesota has nothing to be proud of, we don’t have a single hospital in the top 50 for providing community benefit.  Our top hospital for community benefit is a small rural one.  And that is consistent with the Twin Cities having several non-profit systems with extremely high prices and profits and apparently giving few of those profits back to the community.   We have a national and state administration that is regulation happy.  If they really want an appropriate target for regulation, it is the profits and compensation practices at these allegedly non-profit health systems.

Join the discussion 4 Comments

  • Rob says:

    The fact that Cook County Hospital (aka government hospital) is in the top 50 is all you need to know about what a crock that report is. It skews the “community benefit” numbers of the other hospitals (mainly Rush and UofChicago) because the other hospitals dropped out of the city’s “trauma network” (ambulance emergencies) because it was so heavily skewed to street gang gunshot emergencies. Both hospitals still get enough of those as walk-in emergencies.

  • guest says:

    Thanks for pointing out the absurdities of these non-profits. Do you see sky-high med school tuition as a background, contributing factor? E.g., are doctors coming out of med school so deep in debt that they have no choice but to play the game and become a cog in a non-profit machine? Ironically, aren’t many of these schools also non-profits?

    Do you believe the health insurance industry is also part of the problem here? Combine the health insurance industry with the government health agencies, and there ends up being this enormous corporate/bureaucratic industry that in and of itself provides no health care. I guess all I’m asking is why does paying a bill have to be so complex?

    About the report you linked to, there is a possible red flag for me in the list of top 50 hospitals. A number of them appear to be in the NYC area. Well, there is an article from Jan. 4, 2020 (pre-pandemic, too) called, “Report: NY’s poor hospital safety ratings deserve deeper look”. The report took a dim view of NYC hospital performance. “New York City hospitals performed particularly bad. On timeliness of care, for example, 100 percent of New York City hospitals ranked below the national average. On readmission, 97 percent did. On patient experience, 94 percent did.” By those metrics, the benefit does not look too good.

  • Chris Foley MD ABIM says:

    Of course the universal center of non profit fraud has been Minnesota for decades. I was a director for 2 MCOs (managed care orgs) and know from the inside how the ingenious skimming occurred. MDs, nursing, etc were simply units of labor to be exploited and along with it the doctor patient relationship — which never be a 3 party one. I sat on a deck overlooking a lake in 1988 with Paul Ellwood — the godfather of the HMO — who, like any euphorian central planner pedantically told me that the era of the physician was over and that health could literally be “planned”. Of course back then the avg admin fraction from the premium dollar was ~ 11%. Now it is well north of %30 when you fraction in the ad space on NPR and the billboards. Hidden in the “zero profits” at the end of the year is the admin bonus package for the “Team”, the new office furniture, the meaningless conferences for “team building” in Costa Rica, etc. It is a massive racket and has zero to do with the public health.

  • Rob says:

    To add to Foley’s point, in Chicago the big 5 health systems (all university-related: UofC, UofI, Northwestern, Rush, and Loyola) make up about 10% of the TV and Radio advertising in town. 15 years ago, their ads were rare – the private systems ads were more common (and still not saturating). Now there is an ad for one of the big 5 in nearly every commercial break (aka saturation) and I can’t remember the last time I saw or heard an ad for the remaining private systems.. Naturally, the “news organizations” do not want to upset their gravy train so they have essentially become mouthpieces for their largest advertisers. (Not that such a thing is surprising or even new, just that people don’t realize how phony it makes the news reporting.)

Leave a comment