Friday, December 1, 2023

Nonprofit Hospital Wolves Disguised as Sheep

Wolves In Sheep's Clothing

From a NY Times Op/Ed:

Over the past year, a new hospital strategy has come to the fore, the cross-market merger. In the past, most mergers and acquisitions involved hospitals or physician groups in the same geographic area. Now health care systems are reaching far and wide to find other hospitals to acquire. This is exemplified by the California-based Kaiser’s acquisition of Geisinger Health in Pennsylvania announced in April. Since then, hospitals in Missouri, Texas and New Mexico were involved in two other cross-market mergers. In another example, Advocate Aurora Health’s merger late last year with Atrium Health created a juggernaut with 67 hospitals strung across six states, from Wisconsin to North Carolina. We are witnessing the advent of the new American megahospital system.

So why are nonprofit hospitals behaving in ways that seem to focus more on dollars than patients? Hospitals are undergoing a reckoning about their role in the national health system. The United States will require fewer hospital beds in the future if current trends continue. This looming likelihood — plus financial challenges from the pandemic, a severe worker shortage, rising inflation and stock market volatility — has put nonprofit hospitals in survival mode.

Accordingly, they have prioritized protecting their finances, focusing on scale and market power. Unfortunately, these actions too often come at the expense of their mission to serve their communities. This has meant less charity care for patients who cannot afford expensive surgeries or emergency room visits and higher prices for those who can.

The key is getting boards to act in service of the mission. They need greater accountability. And that’s where lawmakers and policymakers can help, by finding ways to encourage or require boards to resist the growth interests common to organizations. Hospital systems, like living organisms, tend to put survival and proliferation above all else.

A second related issue is that too many boards are full of members who have financial skills or have made big donations. To shift toward their mission would almost certainly require hospitals to reconstitute their boards. They would need to replace some financially minded members with community-minded ones. And regulators like the I.R.S. may need to remove the tax-advantaged status for egregious actors so that boards take this threat seriously, just as in Pennsylvania.

darryll k. jones

https://lawprofessors.typepad.com/nonprofit/2023/12/nonprofit-hospital-wolves-disguised-as-sheep.html

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