We can generally agree that preying on someone who is sick and injured for excessive financial gain is bad form. Sadly, that’s business as usual for many hospitals across America.
Recently, the New York Times called out Providence Health System, a 51-hospital chain, and one of the country’s largest nonprofit health systems, for hounding patients, who were eligible for free care, for payments. A second story outed Bon Secours, another large nonprofit health system, for using an under-resourced hospital in a poor black community in Richmond, Virginia, to basically launder money. Bon Secours exploited a federal program that allowed them to buy drugs at a greatly reduced price and sell them for full price, up to eight times more. But rather than direct those profits to benefit their underserved community as intended, the health system pocketed the windfall.
Appalling, yes. Unusual, no.
Our nation’s tax code has been allowing nonprofit hospitals to get away with this rip-off for years. Of the nation’s 5,139 community hospitals, nearly two thirds are nonprofit, or tax exempt. They pay no taxes: no property tax, no sales tax, no income tax. In exchange for not ploughing tax dollars back into their communities like every other tax-paying entity, nonprofit hospitals are supposed to grant a commensurate amount of benefit, much in the way of charitable care. Except they aren’t. Instead, they channel those funds into exorbitant executive salaries, and cathedral-like hospital towers bedecked with museum-worthy art collections.
Meanwhile, they send financially strapped patients to collections, put liens on their houses, garnish their wages, and drive hard-working Americans into bankruptcy. According to a report from Kaiser Health News, 100 million Americans, a full 41% of U.S. adults, have unresolved medical debt. A quarter of those owe more than $5,000.
And yet, while patients are drowning in debt, hospitals and those who run them keep getting richer. Think how far the $10 billion Providence has in reserves could go toward relieving that burden.
Providence and Bon Secours are hardly the only bad actors. According to a report from the Lown Institute, nearly three-quarters of private nonprofit hospitals don’t spend in charity care what they receive in tax breaks. If they did, Americans would benefit from $17 billion in charitable health-care services. Don’t misunderstand. This is not “free” care. We have all pre-paid for it with our tax dollars. Ironically, studies show that nonprofit hospitals actually pay less in charitable care than tax-paying for-profit hospitals.
The IRS code explicitly states that to qualify as a tax exempt 501(c)(3) organization, a hospital “may allow no part of its net earnings to inure to the benefit of any individual,” that includes “excessive salaries.” In other words, if you’re a nonprofit, after paying reasonable nonprofit-type salaries, the remainder should go to serve your cause. Otherwise, pay taxes. The CEO of Providence makes $10 million a year. The CEO of Bon Secours makes $6 million. If that’s not excessive compensation, what is?
And, yet again, that’s not unusual. The CEO of Kaiser Foundation made $16 million, the CEO of Memorial Health System made $11 million, and the CEO of St. Luke’s Health System made nearly $9 million in salaries alone, according to a recent report.
Meanwhile, Americans are struggling under the yoke of historically high inflation, rising health-care premiums and stagnant wages. Worker pay is flat because skyrocketing health-care costs continue to eat up company profits, which otherwise could go to raises or new jobs.
To make matters worse, the healthcare industry has profited excessively by keeping their prices hidden. Unlike in every other industry, consumers of health care don’t know the price they will pay until after they get the non-returnable, non-refundable, non-negotiable care. Despite a federal law that requires hospitals to show their prices, few are complying, as little as 16% according to an August report.
Not surprisingly, none of the 35 Providence hospitals or the 33 Bon Secours hospitals assessed was complying. They continue to operate in the dark, creating a perfect breeding ground for price gouging, for the extreme price variations that commonly exist within and among hospitals, for the egregious profits that go toward excessive salaries, and for financial abuses that come at the expense of those who rely on them.
Hospitals’ predatory payment strategies, their abuse of the tax-exempt status, and their flouting of the price transparency law are unconscionable, and borderline criminal. Hip-hop artist Fat Joe put it this way in an ad playing nationwide: “They robbing us.”
As long as hospitals continue to operate in the dark, our communities will continue to get fleeced by the very people who are supposed to take care of them.
Marni Jameson Carey is President of Power to the Patients, a national advocacy group working to ensure Americans realize their right to know health-care prices up front.