Why Are Nonprofit Hospitals So Highly Profitable? These institutions receive tax exemptions for community benefits that often don’t really exist.

New York Times ^ | February 20, 2020 | Danielle Ofri

[karpov]

...

Patients are understandably confused. They see hospitals consolidating and creating vast medical empires with sophisticated marketing campaigns and sleek digs that resemble luxury hotels. And then there was the headline-grabbing nugget from a Health Affairs study that seven of the 10 most profitable hospitals in America are nonprofit hospitals.

Hospitals fall into three financial categories. Two are easy to understand: There are fully private hospitals that mostly function like any other business, responsible to shareholders and investors. And there are public hospitals, which are owned by state or local governments and have obligations to care for underserved populations. And then there are “private nonprofit” hospitals, which include more than half of our hospitals.

Nearly all of the nation’s most prestigious hospitals are nonprofits. These are the medical meccas that come to mind when we think of the best of American medicine — Mayo Clinic, Cleveland Clinic, Johns Hopkins, Mass General.

The nonprofit label comes from the fact that they are exempt from federal and local taxes (usually including property tax, payroll tax and sales tax) in exchange for providing a certain amount of “community benefit.”

Nonprofit hospitals have their origins in the charity hospitals of the early 1900s, but over the last century they’ve gradually shifted from that model. Now their explosive growth has many questioning — with good reason — how we define “nonprofit” and what sort of responsibility these hospitals have to the communities that provide this financial dispensation.

It’s time to rethink the concept of nonprofit hospitals. Tax exemption is a gift provided by the community and should be treated as such. Hospitals’ community benefit should be defined more explicitly in terms of tangible medical benefits for local residents.

It actually isn’t much of a surprise that nonprofit hospitals are often more profitable than for-profit hospitals.

[DoughtyOne]

Have you ever worked in the health care industry, specifically a hospital?

Have you ever held an upper management level position in one?

Have you ever been able to look over the revenue vs outlay reports?

Have you ever seen some years where these institutions operate at
a loss, and sometimes for more than a year at a time?

In your mind, just because an institution is adding on, you've come
to the conclusion they are making huge profits. In most instances
That simply isn't true.

Some hospitals have huge endowment funds, but most are scraping by.
They're under the gun daily to cut costs and provide top rate medical care.

How would you like to own a restaurant and have customers come in and
dictate to you what they would pay for your best meal, and you would
have to provide the meal at that price.

This is what happens to hospitals across this nation every single day.
The government and insurance companies tell the service provider how
much they will pay, and the provider is stuck providing the service for
that fee, or closing the doors for good.

Do you think it is helpful for communities whose health care providers
close up shop? Do you think it's a good thing that 30 to 45 minutes is
added to the emergency response and care provision time table?

Do you think it's a good situation when the only health care provider in
town, is providing services out of a building built in the 1970s, before
intensive care unit concepts were incorporated into the building design,
and state of the art imaging and other devices were even invented, let
alone wired into the plant grid in a well thought out manner?

These institutions have to replace older plants or die.

Population growth demands they service an increasing body of people. They have to expand.

[leaning conservative]

Have a friend who works for the Cleveland Clinic. She said it is out of control tightly run. No sweets or anything fun in the vending machines. She said there was a guy who would bring forbidden donuts & people would go nuts!

[Texan5]

When people mob the ERs for every sniffle and cut-mostly mojados, but other people who don’t want to pay for anything, as well-it turns the costs up for all of us sensible people who pay for insurance and use it wisely-I don’t see how any med center is going to stay in business at this rate...

One size does not fit all-so before you paint us all with the deteriorating boomer brush-I don’t know where you live, but boomers in BFE -and active ones elsewhere-aren’t likely to start dropping any time soon-I’m a few years shy of 74-but I’m a boomer-I live in the middle of a rural area-like most of my neighbors, I own a business/ work for myself- in my case, as a subcontractor-in construction-I won’t go to a doc unless injured-and I don’t take/use drugs, prescription or illicit-use natural remedies only, do not eat processed food, and I work out.

After wanting to for 10-15 years, I did have my distance vision laser corrected-paid for it myself, not with medicare-which is insurance you pay for-not a freebie like medicaid is-or my supplemental Tricare insurance-I pay for both every month, just like everyone else over 65 does-insurance does not mean free stuff-for every person who runs to a doc for drugs because they have a cut on their hand or a cold, there are 3 frugal, sensible people like me who end up paying more because of their bulls***.

Everyone I know out here eats healthy and works-so I guess it must be the city boomers who will crash and burn from being morbidly obese from a bad diet-with all the side effects, no exercise, etc-they will overwhelm the system if anyone does-not people like me who don’t use the benefits they pay for unless there is a real need...

That’s just my dos centavos...

[Texan5]

Best to not go to an ER unless you are taken there in a REAL emergency-if everybody refrained from the hangnail scenario, perhaps the costs would come down for the rest of the population...

[dirtymac]

Yu mean operating a hospital in a rural community is NOT a community benefit? Maybe look at all the hour that the employees devote to community services.

Anyway ‘not for profit’ is not the same thing as ‘non-profit’. Not for profit means that the organization primary mission is not making a profit but can and sometimes they actually do make a profit, even in the unbelievable burden of really stupid government regulations. Even then all of the ‘excess’ money earned is reinvested in building, equipment, employees, and expanding services.

The NY Times would prefer that all healthcare services would be loosing money so they would have to support total govt takeover. God help us if that ever happens.

[dirtymac]

Idiotic to go to the ER for a hangnail.

It would be really good discussion if some of the response indicate even a smattering of knowledge of the healthcare delivery system.

[Vermont Lt]

Then don’t go to them. Stitch up your own arms.

I thought we were capitalists?

[Jim Noble]

When I started in practice, hospitals were, in effect, public utilities.

Changes made by the Federal government between 1984 and 1987 created an opportunity for grifters to enter the system and set up can’t fail cash machines, which is what hospitals have become.

If you wanted one, single thing that would do more than anything else to stabilize the system it would be to either nationalize the hospitals outright or run them like the electric and water utilities.

[Jim Noble]

providers are just measly slaves who should not command a MANAGABLE salary!!!

Hospitals provide nothing.

They are a workshop where providers should be able to do their thing.

[allendale]

These institutions at their core obtained their capital from generous people who thought they were making charitable contributions to enhance the health and well being of their communities. The government allows them to function tax free for the same purpose. Taxpayers overtly subsidize them. The intent was not to create profit centers that enrich a whole network of insiders. Actually for profit hospitals are far more honest and efficient. Honest conservative capitalists object to the hypocrisy.

[Vermont Lt]

Have you ever worked in a hospital or done hospital administration for a “tax free” hospital, like a Catholic or religious based facility?

I ask because working inside such an organization it has been my experience that is quite the opposite of what you describe.

[lodi90]

If you wanted one, single thing that would do more than anything else to stabilize the system it would be to either nationalize the hospitals outright or run them like the electric and water utilities.

---

We might get defacto nationalization through mergers and stealth regulation. One of our local hospital chains here in Florida was bought up by an outfit from Texas. I think they have like 50 hospitals now. If it’s like consolidation in other industries eventually they’ll just be a handful of hospital systems in the entire country that dominate legistation in Congress.

[cloudmountain]

1. 12 - 13% of the population are responsible for most of the healthcare costs in the nation. That is why insurance companies post huge profits because their most members are relatively healthy.
2. You pointed out an emerging problem because that percentage is fixing to get more robust and Medicaid is fixing to get submerged soon.

1. I agree with your first premise.

2. I don't understand the second one. How is that 12-13% of the population "fixing to get more robust...."??

1964 marked the END of the Baby Boomer population so when THAT group is done the population will become stable again.

[cloudmountain]

“The BABY BOOMERS are 74 years old this year.” Got a hard on for the ‘BOOMERS’ have you?

It is truly amazing how you can come up with such stupid questions. How you got that idiocy from a statement of fact is ... well, appalling.
Am I ever glad that I don't know you, don't live near you, don't work with you and ESPECIALLY that I'm not related to you.

GLORIA HALLELUJAH!

[Svartalfiar]

What about the outrageous pay the admin pays themselves.

That's generally how they are 'non-profit'. All the term mean is that the hospital, at the end of the year, had expenses equal revenues. And if you have too much revenue from overcharging, well, just pay the bosses more and that'll even your profit out to zero.

[Svartalfiar]

The fact is state governments and the feds need to rewrite the rules for charitable institutions that limit admin and board of director salaries.

It pretty much happens to all charitable organizations that eventually they start to be run for the benefit of the group that controls the charity instead of for the benefit of the alleged charitable purpose.

Charitable hospitals should be legally required to put most of their profits toward charity medical care.

Really, we should just eliminate the need for nonprofits at all. It's complicated with a lot more steps than I'm putting here, but basically if we get the FedGov out of the tax business, let them recoup the budget from the States, and let the States figure out taxes to fund this.

[litehaus]

“What about the outrageous pay the admin pays themselves.”

Well....their biggest talent is falsifying
“treatments for fictitious patients”
WHICH—Is paid for by US !!!

The new holy trinity is

Lawyers
Insurance Cos.
Doctors

Working together, they ‘fleece’ the rest of us !

[grundle]

“Non-profit” is a tax status. They are allowed to make a profit - they just don’t have to pay taxes on that profit.

[rollo tomasi]

For Medicaid illegals and other expansions agencies allow.
Medicare, larger retirement population and as they age require more care and services. The last decade of a person’s natural life is when that individual accesses care more frequently (And a lot more costly services along with the frequency).

[cloudmountain]

For Medicaid illegals and other expansions agencies allow. Medicare, larger retirement population and as they age require more care and services. The last decade of a person’s natural life is when that individual accesses care more frequently (And a lot more costly services along with the frequency).

Apparently you attended public school all your life since you don't seem to be able to compose a sentence.
Tossing out unrelated phrases the way you do INSURES confusion and TOTAL unwillingness to respond.

Bye bye.