June 12, 2008
Grassley Slams Nonprofit Hospitals in Hearing Over Health Care Costs
In a Senate Finance Committee hearing held June 10 regarding the high cost of health care, Senator Chuck Grassley took time out to particularly slam the financial practices of nonprofit hospitals. He told the story of an acute lukemia patient who received care from a nonprofit hospital and then before and after receiving treatment became the "victim" of the hospital's collection efforts. In a remarkable bit of dicta (even if true), Grassley stated:
I guess I shouldn’t have been shocked given what was uncovered by my staff’s investigation of hospitals that purport to provide care for the neediest in society and receive significant tax benefits for doing so. In addition to not paying income taxes, non-profit hospitals receive tax-deductible contributions, issue tax-exempt bonds and receive exemptions from state and local property and sales taxes. This committee heard testimony that these hospitals receive benefits of more than $40 billion annually for the care they are supposed to provide. These benefits were granted to hospitals back at the turn of the last century when hospitals were the only places where the poor could go when they were sick. The enactment of Medicare in 1965 and the explosion of the insurance market since then has resulted in incentives for hospitals to treat only paying patients. The current environment is no different than where we were over a hundred years ago. Back then, people with money had private physicians who made home visits. The poor received treatment at alms houses supported by philanthropy. The only difference now is that many of those former “alms houses” have become rich institutions that believe they no longer need to serve the poor to reap all the benefits of their tax exempt status.
Whew. Hard to rebut, I'd say. As I used to tell my criminal clients, "sure its anecdotal, but it starts to be a problem when one has to continually explain anecdotes." Nonprofit hospitals are slowly but surely being villified as criminals, I think. Anyway, I wonder if this means that Grassley intends to start linking the health care crisis in this country to the practices of nonprofit hospitals. I suppose it would not be unfair to at least lay some of the blame on those who pose as charities. Indeed, the witness referred to in Grassley's statement could serve as a poster child for bad nonprofit hospitals, according to a Wall Street Journal article included in the hearing record:
An Ohio State University study found net income per bed nearly tripled at nonprofit hospitals to $146,273 in 2005 from $50,669 in 2000. According to the American Hospital irectory, 77% of nonprofit hospitals are in the black, compared with 61% of for-profit hospitals. Nonprofit hospitals are exempt from taxes and are supposed to channel the income they generate back into their operations. Many have used their growing surpluses to reward their executives with rich pay packages, build new wings and accumulate large cash reserves. M.D. Anderson, which is part of the University of Texas, is a nonprofit institution exempt from taxes. In 2007, it recorded net income of $310 million, bringing its cash, investments and endowment to nearly $1.9 billion. "When you have that much money in the till and that much profit, it's kind of hard to say no" to sick patients by asking for money upfront, says Uwe Reinhardt, a health-care economist at Princeton University, who thinks all hospitals should pay taxes. Nonprofit organizations "shouldn't behave this way," he says. It isn't clear how many of the nation's 2,033 nonprofit hospitals require upfront payments. A voluntary 2006 survey by the Internal Revenue Service found 14% of 481 nonprofit hospitals required patients to pay or make an arrangement to pay before being admitted. It was the first time the agency asked that question. Nataline Sarkisyan, a 17-year-old cancer patient who died in December waiting for a liver transplant, drew national attention when former presidential candidate John Edwards lambasted her health insurer for refusing to pay for the operation. But what went largely unnoticed is that Ms. Sarkisyan's hospital, UCLA Medical Center, a nonprofit hospital that is part of the University of California system, refused to do the procedure after the insurance denial unless the family paid it $75,000 upfront, according to the family's lawyer, Tamar Arminak. The family got that money together, but then the hospital demanded $300,000 to cover costs of caring for Nataline after surgery, Ms. Arminak says.
Not good. Not good at all.
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