Nonprofit Hospitals: "Community Benefit" Not Excessive Compensation is the Problem

In a provocative post on Economix today, Uwe Reinhardt casts nonprofit hospitals in the role of the true villians behind soaring healthcare costs and vicious billing practices riping apart the middle class:

Americans are shocked, just shocked. But what they should have known for years is that in most states, hospitals are free to squeeze uninsured middle- and upper-middle-class patients for every penny of savings or assets they and their families may have. That’s despite the fact that the economic turf of these hospitals – for the most part so-called nonprofit hospitals – is often protected by state Certificate of Need laws that bestow on them monopolistic power by keeping new potential competitors at bay . . . As George Bernard Shaw, whose works include “The Doctor’s Dilemma,” might have put it, that any lawmaker would grant hospitals monopolistic powers plus the freedom to price as they see fit is enough to make one despair of political humanity. . . . All manner of amazing behavior can hide under the pious label of “nonprofit.” A giant, inscrutable economic sector, in command of trillions of dollars in resources, nonprofits are governed by nonelected, self-perpetuating boards and virtually no effective accountability to any “owners” or the general public. By comparison, for-profit institutions are paragons of good corporate governance, transparency and accountability; I shall comment more on that in a future post. 

The posts goes on, painfully describing how the focus on "community benefit" and the sensationalism of hospital executive compensation has done nothing but obscure the real problem and thus the real solution. 

It should be possible to compensate hospital executives well without treating middle-class uninsured people like lemons to be squeezed fiscally. After all, as Mr. Brill shows, these so-called nonprofit hospitals typically have ample profits that would permit humane comportment in billing the uninsured while paying executives enough to retain them.

Read the post for Reinhardt's solution to the mess he lays at the feet of nonprofit hospitals.  All I can say is that economist may be no better at predicting economic outcomes than siesmologists are at predicting earthquakes, but the best of them sure are good at calling the rest of us stupid.

 

dkj