If we get serious about our country’s fiscal health – and given our crushing national debt, and our increasingly unsustainable interest payments on it, thanks to Moody’s recent and historic downgrade, we finally have no choice – we should start being honest about the “health care industry,” and the costs associated with it. When we do, our sharp focus will naturally land on hospitals, especially those affixed with the offensive misnomer, “non-profit.”
Even in the eye-popping context of Americans’ annual $4.9 trillion “health care costs”, hospitals accounted for over $1.5 trillion, or 31%, in 2023 alone. And when you place that first astronomical number in a more digestible context, as the Milliman Medical Index has helpfully done, you’ll be ill to learn that it translates into a yearly spend of more than $32,000 for the “average” American family of four.
One would think that the quality of that care must be top-notch, thoroughly efficient, and entirely commensurate with the expenditure, befitting the richest, most technologically advanced nation in the world. Hardly, according to available data…and anecdotal evidence from just about any friend or family member who has recently suffered a hospital visit, as well as the ensuing cascade of surprise bills that follow.
As their name suggests, “non-profit” (and “charitable”) hospitals are supposed to operate outside the excepted norms of capitalistic enterprise, and as a result, are exempt from federal – as well as many state and local – taxes, given the purported “benefit” they provide to the communities in which they operate.
They do this, in theory, by offering affordable care to their patients, alongside other “benefits” to the surrounding region - all of it heavily subsidized by the taxpayer, of course. To justify this, nonprofit hospitals are compelled to meet certain criteria enumerated in the so called “Community Benefit Standard,” and must document their compliance to the Internal Revenue Service (IRS) to ensure thorough reporting and transparency. However, to the expensive detriment of both taxpayers and patients, they have repeatedly failed to do so.
This has not gone entirely unnoticed. The Lown Institute, a Boston-based independent healthcare think tank, devoted a team of researchers to dive deep into the IRS data of 2,425 non-profit hospitals throughout the country. The results were irritatingly conclusive, proving that more than 1,900 non-profit hospitals – a full 80% of them – had achieved “fair share deficits,” meaning they gave less – much less in a lot of cases – back to their communities than they had received in tax breaks. In total, the amount was so staggering – a shocking $25.7 billion in fair share deficits –it would have been sufficient to “pay off the medical debt of everyone in California, Texas, New York, and Pennsylvania combined.”
Non-profit hospitals, perhaps given their largely misleading classification as “charitable entities”, have mostly escaped angry public scrutiny in the debate over ever rising health care costs in America, but Americans are starting to notice that “non-profit” hospital CEO salaries have reached Fortune 500 levels, and continue to rise exponentially. Between 2012 and 2019, CEO compensation grew 30 percent – reaching a mean average of over $600,000 a year – which, frankly, seems kind of “profitable.”
Hospitals now, more than ever, must enter the spotlight especially considering one of the dominant and deleterious trends of the past decade, which industry analysis indicates will continue, perhaps even accelerate: the consolidation of hospital systems, and the acquisition of doctor’s groups, resulting in the further monopolization of health care markets, driving prices even higher.
Waste, fraud, and abuse - especially when tacitly sanctioned by government agencies - is still wasteful, fraudulent and abusive.
During this session of Congress, thankfully, members have been stepping up with a wide variety of legislative proposals to address hospital price gouging. Some of these bills wouldenhance price transparency at hospitals, align payment rates with the health services offered rather than the location in which they are offered (known as “site neutrality”), and hold non-profit hospitals accountable to meeting federally codified community benefit standards, just to name a few. It’s a good sign that Congress is poised to act because the problem is getting worse every year, as health care spending is growing at a rate that is outpacing the U.S. GDP.
Americans are certainly yearning for transparency on the issue: in a just released survey, more than 91% of voters support requiring hospitals to publicly post their prices for common procedures so patients can shop for the most affordable care. Does anyone believe they wouldn’t also clamor for the same special – and profitable – tax treatment afforded “charitable” hospitals?
Ken Blackwell, is the former Treasurer of Ohio and member of the Board of Directors of Fifth/Third Bank. He is an adviser to the Family Research Council in Washington, DC.
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