Thousands of hospitals around the country operate as registered non-profits. This means they provide charity care – free care to low-income community members – un-or underinsured folks in need of medical care. In exchange, and in theory to compensate for the revenue lost for providing care to folks who cannot otherwise pay, these non-profits are given substantial tax breaks. Thanks to lax oversight, however, the incentive system has been distorted such that charity care is profitable business for many hospitals around the country.
A recent survey evaluating 2,425 nonprofit hospitals around the country found that 80% spent less on financial assistance and community investment than the estimated value of their tax breaks. This means that these hospitals were generating more profit from their tax breaks than they were spending on charity care. In some cases, these differences amounted to more than $100M in income for the hospital; much more for hospital systems. This difference, which the Lown Institute – the think tank that compiled this index – calls the “fair share deficit.” In Washington state, this fair share deficit amounted to a $970M. Additionally, 98% of Washington hospitals are providing less value in charity care than they are getting in tax incentives.
We know that most hospitals in Washington are part of larger medical systems; many of these are national systems. According to this survey, the three national systems with the largest fair share deficits are: Kaiser Permanente ($1.2B fair share deficit), Providence ($1B deficit); CommonSpirit Health ($923M deficit). These three have substantial presence in Washington state. Additionally, debt collection practices victimizing patients tends to further reflect a distortion of health care priorities by several of these health care systems.
It seems that the noble cause of nonprofit status conferred on hospitals has been distorted in the pursuit of rather incredible profits. Indeed, there is little incentive to correct these imbalances when the profit motives are so substantial.
