I began my career as an accountant for a nonprofit hospital. If you think the hospital executives were unconcerned about profit you would be wrong. As an aside, that is true of all nonprofit organizations. They must earn more than they spend to stay in business. This is where it gets complicated. A small nonprofit hospital could, at least in theory, charge only enough to break even, providing charity care to those who could not afford care. Or they could charge a little more (or care for fewer charity patients) and plow profits back into expansion. A nonprofit hospital could even earn enough profit to expand one hospital into a health care system. In other words, they could act like a for-profit corporation, except without having to pay taxes or worry about shareholders. The latter is what many nonprofit health care systems have done.
Something to remember is that 100 years ago, modern medical technology did not exist. Hospitals were little more than places to convalesce or die. Modern medical technology and expensive drugs provide real hope for recovery, but at a much higher cost. The old charity hospital model is hard to replicate in the age of expensive, modern medicine. Many Catholic hospitals were founded a century ago by nuns in the name of service. Critics note that Catholic Bishops aggressive police certain practices of the Catholic Health Care System, making sure reproductive doctrine is observed, not allowing physician assisted suicide and so on. However, the church is less aggressive in making sure their hospitals serve the poor and downtrodden.
Research by Community Catalyst, a consumer advocacy group, found that Catholic hospitals treat fewer Medicaid patients than other nonprofit hospitals, something at odds with their mission of prioritizing health care needs of the poor and underprivileged. And like other hospitals nationwide, many large Catholic health systems allow aggressive tactics against patients for unpaid medical bills such as using third-party collections, filing lawsuits, placing liens, garnishing wages, reporting bad debt to credit bureaus, or restricting care to people who owe, a KFF Health News investigation found.
Nonprofit hospitals receive a tax exemption in return for providing community benefits. Federal law does not spell out how much charity care and community benefits are required. Various states set guidelines. For example, when I worked for a hospital in Texas, the state required between 4% and 5% of net patient revenue be provided in charity care. Some states do not have guidelines or enforce them. In addition, community benefits reported to the IRS are often not the types of services the community needs. Merely having an emergency room is often cited as a benefit for the community, regardless of charity care provided. One Catholic hospital even reported its spending on health professional education as a community benefit.
Now no nuns serve on St. Joseph Medical Center’s or PeaceHealth’s leadership teams… the Lown Institute estimates the health system spent $108.7 million less on community investments than the value of its tax exemptions.The Lown Institute considers five categories of community investments, including financial assistance for patients, community health services, and health services such as free clinics and addiction treatment.
The Lown Institute’s definition of community benefits is in line with what most people would expect out of a charity hospital. However, free clinics, addiction treatment, financial assistance programs and community health services are costly to provide.
The Catholic hospital system has grown into a large network of hospitals.
As of 2023, there were just over 600 Catholic general hospitals nationally and roughly 100 more managed by Catholic chains that place some religious limits on care, a KFF Health News investigation revealed.Years ago, Catholic hospital mergers were motivated primarily by ministry, said Lawrence Singer, a retired associate professor who was affiliated with Loyola University Chicago School of Law. But things have changed.“It really isn’t ‘save the ministry’ any longer,” he said. “It’s really business that’s driving a lot of this now.”
Hospital consolidation raises market power to charge higher prices. Many nonprofit hospitals have expanded, merged and consolidated into health care systems that dominate a regional market. The term nonprofit hospital is no longer synonymous with charity hospital. In fact, the term charity hospital should be retired as no examples exist.
Red more at Kaiser Health News: At Catholic Hospitals, a Mission of Charity Runs Up Against High Care Costs for Patients