I began my career working for a nonprofit hospital. That was more than 30 years ago when the cost of health care was much lower compared to the average wage of American workers. In the late 1980s, for example, the percent of GDP spent on health care was just over 10%. It’s nearly 20% today. Around that time a politically motivated attorney general began looking into the amount of charity care provided by nonprofit hospitals within the state to make sure hospitals were providing enough to justify their tax breaks. The investigation ultimately found hospitals in the state were providing enough charity care to avoid further investigation, but perhaps the question should have been why was the bar set so low? After all, there are construction cranes standing at every major hospital campus in my town.
The issue of nonprofit hospital status came to a head in Pottstown, Pennsylvania, where a for-profit hospital was purchased by a firm that converted it to a not-for-profit facility. That meant the hospital didn’t pay federal or state income taxes. It didn’t pay sales taxes on supplies, and most of all it no longer owed property taxes.
The takeover by Tower Health meant the 219-bed Pottstown Hospital no longer had to pay federal and state taxes. It also no longer had to pay local property taxes, taking away more than $900,000 a year from the already underfunded Pottstown School District, school officials said.
The school system appealed the nonprofit tax election and when a state court reviewed the compensation of senior executives the property tax beak was struck down.
The court decision, which Tower Health is appealing, stunned the nonprofit hospital industry, which includes roughly 3,000 nongovernment tax-exempt hospitals nationwide.
“The ruling sent a warning shot to all nonprofit hospitals, highlighting that their state and local tax exemptions, which are often greater than their federal income tax exemptions, can be challenged by state and local courts,” said Ge Bai, a health policy expert at Johns Hopkins University.
It amazes me that for-profit hospitals can coexist alongside nonprofit hospitals due to the tax breaks their competitors enjoy. Indeed, that for-profit hospitals survive and even thrive is a testament to how uncompetitive the hospital sector is. In any other industry it would be impossible to compete against all the advantages nonprofit hospitals enjoy.
The Pottstown case reflects the growing scrutiny of how much the nation’s nonprofit hospitals spend — and on what — to justify billions in state and federal tax breaks. In exchange for these savings, hospitals are supposed to provide community benefits, like care for those who can’t afford it and free health screenings.
More than a dozen states have considered or passed legislation to better define charity care, to increase transparency about the benefits hospitals provide, or, in some cases, to set minimum financial thresholds for charitable help to their communities.
This brings me to an article I read in The Los Angeles Times. Crushing medical bills are causing Americans to lose faith in the health care system.
For Emily Boller, it was a $5,000 hospital bill for a simple case of pink eye that took four years to pay off. For Mary Curley, it was the threatening collection letters from a lab that arrived more than two years later, just as her husband lost his job and the family was fighting to save their home.
For Cory Day, it was a $1,000 fee he was charged at an emergency room outside Los Angeles, even though he only checked in and then left before being seen. “I feel like the hospital is a predator,” Day said. “This is a place that’s supposed to be looking after you.”
The experience offered a stark lesson, he said: “Don’t trust the system.”
There was a case from Georgia where a lady named Taylor Davis checked in at an emergency room in Georgia but left after seven hours before being seen. She was later billed $700.
Following the billing, Davis said she’s reluctant to return to any ER or hospital and now sees it as a “last resort.”
Wouldn’t a (non-predatory) ER be a great example of a community benefit? Although the LA Times article did not specify which type of hospitals the above examples were from, there’s a good chance they were committed by nonprofit hospitals. The writer talks about having spent hundreds of hours interviewing Americans about health care and noticing a similar theme, saying:
Many of my conversations with patients have revealed a deep and disturbing disillusionment with our healthcare system.
If nothing else, this should be a flashing red light: the simmering resentment of growing numbers of patients who feel victimized by this system.
Mr. Levey concluded his article saying:
Absent action, patients’ trust is sure to erode further. And without the trust of the people it serves, this American healthcare system cannot long endure.
Let’s hope he’s right. Our health care system is in dire need of reform into a patient-centered health care system that competes for consumers’ business rather than ambushes them.