Monday, March 12, 2007

Are There Really Any Nonprofit Hospitals Left?

The Fort Wayne Journal-Gazette's Dan Stockman takes a critical look at the difference between nonprofit and for-profit hospitals and, not surprisingly, he learns there is little difference between the two other than one pays taxes and the other does not. In describing Fort Wayne's Parkview Hospital, which is supposedly nonprofit, Stockman writes:

Imagine a local company with more employees than the General Motors plant and an amount of land and number of buildings similar to Lutheran Hospital.

The company made a $57 million profit in 2004, which came after $138 million in profits since 2000. In those five years, it averaged a 10 percent profit margin – comparable to most Fortune 500 companies. Its parent company at the end of 2004 held $470 million in stocks and bonds.

But the company doesn’t pay state or federal income taxes on its profits. The parent company didn’t pay taxes on the capital gains it made on its nearly half-billion in investments.

And neither one paid property taxes on its millions of dollars’ worth of land and buildings. But you don’t have to imagine such a company – it’s Parkview Hospital.

Lutheran Hospital pays taxes on its income – its 2004 profit was $71.9 million, according to state records. It pays property taxes on its land and buildings – the 2006 bill for the main hospital building was $983,175, county records show.

As Stockman points out, Parkview gets its nonprofit status because it supposedly performs a "community benefit." So what counts as a "community benefit"? Stockman writes, "But some of the things non-profits count as a community benefit are things that for-profit entities consider the cost of doing business: Bad debt, training employees, reimbursements that don’t cover costs and promotion." On that basis, Parkview claimed a community benefit of $61.7 million on its tax return according to Stockman, including about $10 million in subsidized care (i.e. the amount people were unable to pay for their services). The figure also included $22.9 million in bad debt and $28 million in unreimbursable Medicare or Medicaid expenses). Parkview tells Stockman, however, it is no longer counting these latter two categories as part of its "community benefit".

Making matters worse is the utter failure of the Internal Revenue Code to provide a bright line rule for determining "community benefit." A nonprofit tax expert tells Stockman there is no standard for determining what constitutes a "community benefit." That allows the nonprofit hospitals to set their own rules.

With so many uninsured Americans, some are looking at taxing these so-called nonprofit hospitals as a means of funding health care for the uninsured. “People are looking around for somebody to ameliorate that problem,” PriceWaterhouse's Reatha Clark said. “And the questions might be more salient when you have for-profit hospitals nearby who are paying taxes.” A Kent Law professor tells Stockman it has always been a myth that nonprofit hospitals are charities. “This core myth that non-profits exist to serve the poor was never true. … Maybe it should be, but it never was the historic reason for it,” Evelyn Brody said. “They’re not required to serve the poor, they’re not required to lose money, they’re not required to underpay their employees; … until the law changes that’s not what we’ve asked them to do.”

Stockman's story really brings this issue home. These nonprofit hospitals have become giant corporations which are escaping taxation completely. If you've ever been unfortunate to be a patient in one of these hospitals, you quickly learn they are all about profit. The billing practices of these hospitals would be considered criminal if they were done by any for-profit businesses.

I remember more than a decade ago when EDS implemented a new Medicaid billing system which allowed the state to enforce the Medicaid law to the letter of the law for the first time, the providers, including nonprofit hospitals learned they could no longer bilk the system the way they had for many years. They went running to the legislature for help, which created an oversight committee to investigate EDS (who I was representing at the time)--as if it had done something wrong. After many months of investigation, it became apparent the only real problem had been the provider's billing practices (i.e., billing for services which were non-reimbursable and failure to file claims properly). The state actually had success for a brief time in cutting Medicaid expenditures before reimbursement rules and other changes led to escalating costs again.

Let's pull the cover of nonprofit status off these hospitals. Unless they want to actually become true charities, it's time for them to pay their share of taxes. Maybe this will put an end to the ever-increasing building boom of new facilities out into the suburbs and into the rural areas of the state, which are totally unnecessary.


Anonymous said...

AI said "The billing practices of these hospitals would be considered criminal if they were done by any for-profit businesses."

Gary, what would some of these practices be?

Gary R. Welsh said...

I've gone through the exercise of trying to get explanations for each of the charges on their billing statements. They are nearly impossible to understand. The people you talk to on the phone can rarely explain and justify the billing items. I'm still waiting for an explanation for a bill I just received for a service which was supposedly rendered more than a year ago. The billing rates are all over the place. The highest billing rates are reserved for people who arrive without insurance--they can be several times the rate they are being reimbursed by insurance companies or Medicaid/Medicare. Then they wonder why those people don't pay their bills.

Gary R. Welsh said...

From a medical fraud report:

"Hospital bills can be very complicated and unless you are a medical professional yourself you will undoubtably be confused by some of the items and services listed. Don't be intimidated by this because some of the errors will be more than obvious to even an untrained eye. If you've gone to the hospital to have your tonsils removed and see a reference to chemo-therapy it's going to stand out on the bill. Don't be afraid to make some phone calls to question this. You might have to pay for it yourself if your insurance refuses to pay it. Medical-related debt ranks second among causes for personal bankruptcy in the United States, after credit card debt. That's partly because even if you are insured you may have to pay 20% of your bill out-of-pocket. A single error could cost you hundred or even thousands of dollars.

Some of the errors may be more difficult to identify and the item may be valid even if the amount billed for it is not. Overcharges are one of the most common billing errors. Duplication is another common billing mistake. If you see the same charge listed more than once you should ask the hospital why. It may be a valid charge but this error is so common you shouldn't let it go unchallenged.

Here are the most common areas of overcharges and errors, with tips on what to do if you find irregularities:
Duplicate billing: Make sure you haven't been charged twice for the same service, supplies or medications.
Number of days in hospital: Check the dates of your admission and discharge. Were you charged for the discharge day? Most hospitals will charge for admission day, but not for day of discharge.
Incorrect room charges: If you were in a semi-private room, make sure you're not being charged for a private.
Operating room time: It's not uncommon for hospitals to bill for more OR time than you actually used. Compare the charge with your anesthesiologist's records.
Up coding: This common billing mistake occurs when a doctor switches a high cost medication or expensive service for a cheaper alternative then charging for the more expensive item or, in some cases, charging for both!. An example of this would be the doctor replaces a top dollar brand name medication for a generic alternative.
Keystroke error: An everyday mistake in which someone just happens to hit the wrong keyboard key. An innocent enough mistake but one that can cost you a significant amount of money.
Canceled work: Sometimes a procedure that was ordered and then later canceled will still wind up on your final bill.

Anonymous said...

Want some examples of hositals that make no money? Wishard makes no "profit". Riley makes little, if any. Methodist doesn't do much better. If you make less than 200% poverty, Univeristy, Methodist, and Riley Hospials you aren't even billed. 200% to 400% of poverty a massive discount from the "rack rate" you describe.

This is the issue of our age.

Isnt Eric Miller's organization a non taxpaying 501c3? What's its charitable purpose?

Anonymous said...

Clarian not making money? What have you been smoking anon 7:30. Are you aware of how many new buildings they've constructed over the past decade. How much did that people mover between Methodist and IUPUI cost? They're spending money like there's no tomorrow.

Gary R. Welsh said...

anon 7:30, Advance America is a 501(c)(3). It claims to serve an "educational" purpose.

Anonymous said...

"Maybe this will put an end to the ever-increasing building boom of new facilities out into the suburbs and into the rural areas of the state, which are totally unnecessary."

So an urban person deserves to be closer to a first rate ER and hospital than a suburban or rural person? What kind of person are you? You constantly harp about "equal" treatment of everyone. Sounds like when it comes to medical treatment options for us suburban and rural folk, you think we should just have to roll over and die.

Hamilton Co. has around 250K folks, why is it unnecessary to build a hospital out there? Do you just want to force people to live urban if they want healthcare?

Anonymous said...

Don't let Clarian fool you, they are making big time money. Hell, there was an article about Wishard actually turning a profit for once. Wishard is about the only true not-for-profit hospital if you ask me. Clarian does a lot of help for lower income people, but they also raise a ton of money when they wave that Riley Hospital flag. License plates, Riley Miracle Homes, telethon, Rock-for-Riley, etc. are all examples of how a very rich not-for-profit helps keep money flowing in. Don't also over look the strong relationship Clarian has with Indiana University. IU gets tax money and donations. The foundation is loaded with cash. All of these places help folks. They discover new things all the time. The problem we have in this country is insurance companies. Too many are out for their shareholders, not their own customers. Too many CEO types making sure they make well into the seven figure range.

Gary R. Welsh said...

anon 7:30, there is a big difference between a government-owned hospital like Wishard and other nonprofit hospitals. Wishard is allocated money from local tax revenues to subsidize its operations. It truly doesn't need to operate at a profit.

Anonymous said...

What is AI's charitable purpose? Operating a blog is "education" for purposes of a revenue ruling? Is its 990 on

The biggest 501c3 is Ascension Health, the parent company of St V's.

Gary R. Welsh said...

AI is not a 501(c)(3), but it also doesn't make any money.

Anonymous said...

Health cost containment councils were set up nationwide by Pres. Carter in 1977. They had their ups and downs, but for the most part, they prevented the health care duplication explosion.

You know, the one where a world-class children's hospital exists, but another ego-driven organization thinks they need one in the same area, too. When there was no evidence of needed adidtional beds.

Those councils worked. Reagan did away with them. Ironic, huh?

Such duplication is expensive. We end up paying for it. By "we" I mean consumers and employers, in the form of higher health care costs.

To the whiner who thinks we need these expensive duplications in the outskirts, good luck. You're gonna pay for them. It'd have been cheaper to haul your ass to Methodist, IU, Community, St. Frances or St. V's existing campuses, than to duplicate them. Competition fueled this ridiculous duplication, and no one was there to stop them from playing with our money. So once one did it, they all did it.

And their near-nonsensical billing operations are made necessary by, and ultimately funded by, this duplication explosion. It's nonsense.

National ehalth care will come soon enough. If you think the baby boomer generation, which hasn't yet needed the kind of medical care they'll need in their retirement, is going to stand still for this expensive paperwork jungle, you're kidding yourselves.

Anonymous said...

I came across this blog and decided to reply, because I was a patient at both a "not for profit" hospital and a "for profit" hospital and trust me ... there was a hugh diffence between the two.

I lived in Indianapolis and was very ill and first I went to Wishard Hospital. I was at Wishard for about 10 days. Then the following month, I became ill again (same issue I had at Wishard, and this time I was taken to Community South Hospital.

At the time I had NO health insurance, and spent basically the same amount of time at both Wishard and Community South Hospital.

What was the difference between Wishard - a not for profit hospital and Community South Hospital - a for profit hospital?

Here was the difference:
1. My bill from Wishard was about $9,500.00
2. My bill from Community South was over $67,000.00 --- yep, SIXTY SEVEN THOUSAND DOLLARS !!!

Also, my quality of care was not the same at Wishard compared to Community South. At Wishard I was treated with respect. However at Community South Hospital, many nurses were cruel to me and hurt me when they would move me around in my bed.

Now that I have recovered, I see that all Community South Hospital carred about was $$$$$$$. And since I had no money and no insurance, they did their best to discharge me as quickly as possible.

It was also very obvious that MONEY is what motivates for profist hospitals. I mean, oh please, Community South Hospital charged me over $67,000 verses $9.500 for Wishard Hospital, and it was for the basically same treatment and length of time.

Finally, all I can say is this ... if you ever become seriously ill and end up going to a for profit hospital, you will see what I am talking about.