Article: The Green Halos of Nonprofit Hospitals

The Green Halos of Nonprofit Hospitals
By Kylie the Kranke[n]schwester, Punks for Progress
August 2, 2019

60% of the hospitals in the United States are nonprofit. Nonprofit hospitals and health care systems receive tax breaks in the amount of $24 billion a year in the belief that their charitable contributions to the community are worth at least this much. Is this true? What reporting requirements are in place and how does the federal government quantify “community benefit”?

It was definitely my own naiveté about the American nonprofit sector that led to my disgust when I found out that nonprofits are allowed to make profits and have surplus. What a gross misnomer. I always thought that nonprofits were given a break from the financial dues to the government because they must offer services that either do not exist elsewhere or wouldn’t be available to certain populations or communities otherwise. A system of “fees for services” would be a sin, I figured, in the nonprofit sector and especially with relation to nonprofit hospitals. Surely nonprofit hospitals had charitable intentions for their patients and understood the financial burden of healthcare on individuals in America, right? Turns out- that is entirely wrong. I’ve spent the last few months researching the modus operandi of nonprofit hospitals and healthcare systems and their true motives.

My journey started when I was a nurse working at a catholic hospital and seeing care withheld from patients who could not pay. I thought it must be because the hospital had a religious affiliation and must be a private institution in order to be allowed to do such a thing. A little research showed that catholic hospitals are not private institutions, but public, and not only can they contract with the government healthcare options of Medicare and Medicaid and receive grant money from the government, they are NONPROFIT institutions!

“Nonprofit” is simply a designation by the IRS and all the extra saintly attributes we personally attach to the meaning of the word “nonprofit” are wrong. According to the IRS website:

“To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual.”

And those “exempt purposes” are such according to the IRS website:

“The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or
animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”

What stuck out to me from these definitions was simply that there could be profit, but that profit could not go to one private shareholder or one individual. So, I guess, that’s where the “nonprofit” term comes from? There can be profit, just not for one person. But, when you look at the salaries of top executives at nonprofit hospitals and healthcare organizations, it looks like A LOT of the profit is going to the top. If we look at the public financial documents of nonprofit healthcare organizations we see that the annual salary paid out to CEOs can reach as high as $17.5 million as in the case of Anthony Tersigni, the president and CEO of Ascension which is based in St. Louis. The operating revenue for Ascension in that time period was $21.9 billion. Now, I’ll admit, that $17 million out of $21 billion is a small cut. But how can the CEO of a nonprofit have any moral character if they are taking home $17 million a year. As a blue collar worker in the healthcare industry myself I recognize that he may work 40-50 hours a week like I do; however, my 40-50 hours a week are spent cleaning up incontinent patients and recognizing heart attacks and strokes in my patients as they happen and providing the charity care he gets to brag about, while he likely sits at a desk and attends meetings all day. Now, if we are both employees of the same nonprofit hospital how is this compensation discrepancy ethical and fair?

In fact, according to research, in the ten year period from 2005-2015 salaries for nonprofit hospital CEOs increased by 93% while for nurses in that same time period salaries increased by only 3%. Again, ethical for a so called “nonprofit”?

As I discovered for myself that nonprofit hospitals and healthcare systems could make profit and pay their CEOs such lavish amounts, I wanted to see if their tax breaks were really earned. The most recent study that I could find was from 2011 that calculated the nonprofit healthcare systems to be receiving about $24 billion in tax breaks which include not being required to pay federal income taxes, state income taxes, state sales taxes, and local property taxes as well as enjoying being exempt from other taxes related to financing and charitable contributions. For decades there had been little verification by the federal government that nonprofit hospitals were putting back into their community an amount that was equivocal to these tax breaks. As part of the Affordable Care Act there was an attempt to quantify and require nonprofit hospitals to report their monetary contributions that go toward community benefit that thus earns them their nonprofit status with the IRS. Now, before I list these out for you- the ways the federal government believes nonprofit hospitals should be giving back to their community- I want you to think for yourself. What would you want your local nonprofit hospital to be doing for your community in the aggregate amount of $24 billion?

If you are like me, you would think that first and foremost a nonprofit hospital deserves a tax free status because of the service they provide to the community of emergency healthcare services. But you and I are both wrong. According to EMTALA- the Emergency Medical Treatment And Labor Act- a federal law signed into effect in the 1980s, all hospital emergency departments are required to medically screen and stabilize every patient that comes to their door and transfer them if necessary regardless of health insurance or that individual’s ability to pay. So, nonprofit and for-profit hospitals alike are required by law to treat all patients that enter their doors regardless of their ability to pay. This is not a service solely required of nonprofit hospitals, so they don’t get to count that as a “community benefit.”

So, again, I ask you: What would you expect a nonprofit hospital to be doing for its community? As a nurse who has worked at many hospitals and seen the gaps in healthcare for local communities, I will tell you what I would love to see.

A transitional housing unit. As a nurse I have to discharge patients to the streets and homeless shelters all the time where I know they will not get the healthcare maintenance and medications they will need which will end up in another lengthy and costly admission for the patient and the hospital. I would also like to see food banks set up. Each patient in the hospital is provided three meals a day. With the extra food and the mere capabilities of the kitchen facilities I think it would be easy to feed hungry members of the community. I would also love to see medications paid for and delivered to patients before they leave the hospital. It is such a lapse in continuity of care to spend thousands of dollars stabilizing a patient, hand feeding them the medications they need to maintain their health and then sending them out the door with a paper prescription to take to a pharmacy on their own and jump through the hoops of insurance companies and private pharmacies in order to continue to taking those medications. And that’s just to name a few of my fantasies.

But let’s look at the money spent by nonprofits that can be categorized and submitted to the federal government that counts as “community benefits.”

There are eight specific categories:
1. Charity care
2. Unreimbursed costs from Medicaid
3. Unreimbursed costs from other insurance companies
4. Community health improvement services
5. Unreimbursed health professions education
6. Subsidized health services
7. Unfunded research
8. Cash and in-kind contributions for community benefit

As a nurse who has worked in the inpatient setting for over five years, let me tell you my reaction to this list. I believe the only deserving categories of the description of “community benefit” are number 1. Charity care, 4. Community health improvement services, 6. Subsidized health services and 8. Cash donations to the community and let me tell you why.

What does “unreimbursed costs from Medicaid” mean? It alludes to something very important that you should know about costs in healthcare. A hospital may estimate that a certain procedure will cost a certain amount for you, lets say $20,000. Now, Medicaid and other insurance companies do their own research to decide what they will actually pay hospitals for certain procedures. And it is usually far less than what the hospital estimates and bills to insurance companies. That $20,000 procedure may only actually cost an average of $12,000 and if that’s what your insurance company decides, that’s all that your hospital is going to see in payment. Hospitals frequently pass on extra costs for supplies, specialists, extra observatory doctors, and other “unseen” costs onto patients and insurance companies. Insurance companies won’t pay for what they don’t believe is necessary. Now, the difference in what the hospital bills for your procedure ($20,000) and what your insurance company will pay for it ($12,000) is either passed on to you or a hospital can count it as a “community benefit” as “unreimbursed costs from Medicaid and other insurance companies.”

Category 5- health professions education. Again, as I have been an employee of many nonprofit hospitals and had to attend mandatory trainings and staff meetings, I do not think it’s a “community benefit” to educate staff. Yes, I think it’s necessary and eventually benefits all patients, but I do not like the idea of the money you pay me for mandatory staff meetings to be taken away from other means of supporting the community. For-profit hospitals and all companies alike have to pay to train their employees. Nonprofits should eat that cost, not be able to report it to receive their tax breaks.

Now, while I believe category 1. Charity care is a worthy cause and should be the whole point of a nonprofit hospital, let me tell you that I have never seen charity care in a proactive sense by a hospital. Charity care as it’s defined in the annual budget summary of a hospital I recently worked at is “unrecovered funds.” Nonprofit hospitals will put a price on every service they provide to everyone. And bill them. And send collections services after them. And when all means of harassment have been exhausted, then they’ll count your case as “charity care” which makes them feel good about themselves and have a halo projected above their hospital by those who don’t understand their motives.

To conclude, I want to above all underline my stance that successful healthcare in America can only be achieved when our patients have stable housing, stable income, stable access to providers, and stable access to medications. No amount of medical research and technological development will truly be worth its price until all patients’ basic needs are met. I believe nonprofit hospitals, and all hospitals for that matter, should be spending their time and efforts to create such communities. The fact that nonprofit hospitals exist without providing such and still receive large amounts of tax breaks shows the corporate greed that permeates nonprofits and all companies in America. That $24 billion would be better spent in taxes to the government and funneled to other government programs that help support struggling communities and individuals. Nonprofit hospitals are not a special breed. In a recent study, nonprofit hospitals reported about 7% of their income going toward charity care while for-profit hospitals report about 5% of their income goes toward charity care. Nonprofit hospitals and healthcare systems, which account for 60% of the healthcare field need to be doing a lot more to earn their distinction.

For more information and for references:
http://newsroom.acep.org/2009-01-04-emtala-fact-sheet
https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirementssection-501c3-organizations
https://www.wsj.com/articles/charity-officials-are-increasingly-receiving-million-dollarpaydays-1488754532
https://www.healthcaredive.com/news/ceo-salaries-at-nonprofit-hospitals-up-93since-2005/530353/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5813653/#bibr7-0046958017751970
http://newsroom.acep.org/2009-01-04-emtala-fact-sheet

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