A reader of this blog recently sent me a research report from Ball State. In this study, the author, Michael Hicks, confirms conclusions reached by other solid researchers.
One such conclusion: sick people in Indiana are being fleeced by hospitals that are supposedly “nonprofit.”
Hicks began by admitting his preconceptions:
Several weeks ago, a concerned citizen sent me a financial summary of Indiana’s not-for-profit hospitals. He asked that I look into the issue of excessive profits by these systems. I was skeptical that the issue would be relevant. Profits are critical to an economy; they serve as a guide to pricing and investment decisions and reward the men and women who create value. The demonization of profits is a sure sign of unformed thought. Moreover, not-for-profit hospitals have explicitly chosen to forgo profits as part of their operations, so I doubted the financial summary would reveal anything important. I was mistaken.
What he found shocked him–and should shock us.
It turns out the not-for-profit hospital industry and their network of clinics is the single most profitable industry in Indiana. These profits are so large that when accumulated, they account for roughly 9 percent of the state’s total economy. As of 2017, this industry had accrued more than $27 billion, yes billion. Yet, the not-for-profit industry in Indiana pays virtually no taxes and invests almost none of those profits locally. That money is invested in Wall Street, not Main Street. However, they do charge Hoosiers a premium to access healthcare.
The numbers come from a Rand Corporation study conducted earlier this year that found hospitals in Indiana charging among the highest prices in the nation. Hicks noted that he had confirmed Rand’s data, and had compared the results with with the lack of competition in each healthcare market.
In places where there is little competition, such as Fort Wayne, consumers pay more than twice the cost for a typical medical treatment as they do in places with the most competition. This is how these hospitals accrued excess profits that are roughly 12 times larger than the entire state of Indiana’s Rainy Day Fund.
Hicks says that Hoosiers pay $819 more per person per year than the average American, and attributes that premium to the growth of monopoly power among the state’s not-for-profit hospitals. And he provides examples.
Parkview Hospital is the most blatant example. In one recent year, Parkview Hospital in Wabash earned a 48 percent profit rate. By comparison, Walmart, which also has a store in Wabash, had a profit rate of 3.12 percent that year. Parkview Hospital’s profit absorbed a full 4.1 percent of the county’s GDP (gross domestic product).
Using data from a ProPublica investigative website, I found IU Ball Memorial Hospital enjoyed a lavish 23.8 percent profits in that year. This was more than $100 million, or a full 2.5 percent of the county’s GDP. Despite this, the president of IU/BMH recently begged the city of Muncie to subsidize new luxury apartments so his doctors could live downtown. That subsidy will cost Muncie Community Schools more than $2 million, which just so happens to be about two days of profits at the not-for-profit IU Ball Memorial Hospital. There are literally dozens of other outrageous examples reflecting an appalling lack of governance at not-for-profit hospitals.
This situation is particularly hurtful for local governments that are already reeling from Mitch Daniels’ politically-brilliant and governmentally-destructive constitutionalization of property tax caps. As Hicks rightfully notes,
Local governments are also victims. The most profitable industry in our state pays no property tax and no income tax, but overcharges schools, city and county governments for healthcare.
Hicks ends his article with a warning to profiteering organizations–it can’t go on like this for much longer. As he says, it’s an open invitation to plaintiffs attorneys and politicians alike.
To place this in historical context, the profit rates at Indiana’s not-for-profit hospitals are larger than anything the Gilded Age robber barons were able to secure. In this observation is a final lesson. In the process of vetting this study with several colleagues, I shared it with one lifetime Republican and veteran of two GOP administrations. His response was simply that this is the single best argument for Warren/Sanders healthcare reform he had ever seen. He is not wrong, and that alone should prompt quick legislative, regulatory and legal action.
I wouldn’t bet on it.
Democrat or Republican; “…the single best argument for Warren/Sanders healthcare reform he had ever seen.” but the time frame to implement it and logistics for government to pay for what is now billions in for-profit corporations has not been looked at logically. Working out the problems in the Affordable Care Act (ACA) referred to by President Obama before it was enacted is needed to serve those with health care TODAY. At age 82 I will never live long enough to benefit by single-payer/Medicare for all; nor will millions of others suffering today under the state health care system in Indiana…and other Republican states.
Approximately 4 years ago CBS aired a program on “60 Minutes” regarding training for current Emergency Room doctors and staff in hospitals; trained to admit 20% of ALL ER patients and 50% of ALL senior ER patients. The training included ordering as many expensive tests as possible and continuing to order more expensive tests after being admitted in-patient. I got caught in that last group when hospitalized with flu, severe dehydration, bladder infection and somehow diagnosed as suffering from malnutrition. The piss ant doctor disregarded all answers to questions from myself, my daughter-in-law who had worked as a Certified Nursing Assistant and my granddaughter, a Registered Nurse working in Riley Hospital pediatric heart surgery unit. He was accompanied by a team of interns and decided I had heart disease, admitted me in-patient and began ordering cardiac tests. One of the interns, a woman, checked on me later and told me my actual diagnosis. The hospital’s lead cardiac specialist reported my tests were all normal; the piss ant ER doctor ordered more tests and day 3 as in-patient. The cardiac specialist again reported all tests were normal and I would be released that day just 30 minutes after the ER doctor ordered more tests the following day; I showed the cardiologist the doctor’s note. He immediately went to the nurses station and released me; I did keep the follow-up appointment with him and was told my heart is healthy and all my problems were due to the sever dehydration.
We have the right to question orders and second opinions at all stages of our health care; we need our money much more than the wealthy health care system this government encourages and supports. We have Nixon to thank for repealing the law which prevented health care from becoming the for-profit, nation-wide, health care corporation entanglement it has become.
When I chose to retire to Ithaca, I didn’t think I would have to worry about getting quality healthcare. My thought was that a community dominated by institutions of higher education would definitely have a quality health care system. I was wrong. The NFP healthcare system here sounds very similar to that in Fort Wayne and Muncie.
As long as we don’t call it “profit” we can get away with anything. Even the real not-for-profits spend a lot of time trying to increase the “net income” line on their 990s. Most of Indy’s hospitals are gigantic cash cows.
I’m not considering moving back to the states until I’m over 65 and can have Medicare and SS. There is no way I’m going bankrupt so some hospital administrator can get another summer home on a lake. The US has lost its morals.
This investigation into the financials of the medical industry needs to continue. I for one would like to see a report on the pay and bonuses given to those running and serving on boards of these institutions. And while they are at it, how about an in depth look at the financial set up for those doctors who set up shop inside of hospitals to have their practices covered by the not-for-profit tax break.
The Rand study referenced above is interesting on its own. The initial study was sponsored by the Employers’ Forum of Indiana and covered only Indiana. The results were so interesting that (largely through the efforts the Forum’s leadership) the second study covered 25 states. And it is the first study that reported results by name for each of the 1600 hospitals for which results were possible.
Design: self funded employers, participating insurers and 2 statewide all-payer claims databases sent their hospital claims to Rand. Rand converted each claim to what Medicare would have paid for that set of services. Then Rand compared what employers/employees paid for services to what Medicare would have paid.
Results: The overall average for the 25 states was that hospitals charged employers 241% of Medicare (i.e., 2.4 times what Medicare would have paid). Indiana had the highest state average at 311% of Medicare and Parkview had the highest charges in Indiana at over 400%. All of our large hospital systems had charges that were higher than our state average. Also of interest – Indiana’s hospital charges were twice as high as Michigan’s (311% vs. 156%). Go figure!
These studies and slide presentations can be found at employerptp.org. The next study is due out early in 2020 and is expected to include information from all 50 states.
This has impacted my family harshly. First having to pay as much as 32,000 a year to have insurance for our family (4). The deductible was $5000. Now my deductible is 7,000 and my children grown. Daughter had enormous trouble getting her own policy while trying to legally leave mine when she turned 26. Nearly every year for the last 10 we have met our deductible which ranged from 5,000 to 9,000. That in addition to a yearly cost that was never below 25,000 for the insurance. It was effectively catastrophic coverage in case of the worst happening and there has been for us. And not because of bad behavior on our part but because good health is not guaranteed.
We switched to high deductible policies to try and get the premiums down. We ran our own business and could have hired another employee for what insurance over charge, cost us. I rarely go to the doctor because another family member had chronic health problems and the out of pocket costs.
I doubt the average Hoosier will notice the scams this GOP controlled state afflicts them with. Too busy admiring their POTUS-malevolent, while they smoke, buy another gun and lottery ticket and take diabetes treatments. Myself and spouse are making the painful choice, painful because our family and friends are here, to move out of Indiana. Like so much of Trump America it is a cultural dead end.. I’m ‘so over’ the Midwest with its guns, disdain for conservation, selfishness,greed, shallow piety’s, and mean spirited White pride.
Healthcare should never be for profit.
Concerning Christians, look no further than the good Samaritan parable by Christ. If you support anything else then you’re not Christian! Then, do not try to force your hypocritical values down anyone else’s throat. We won’t even get into food, shelter, the poor, Widows, orphans/fatherless children, and foreign residents/your neighbors.
Hicks has been too busy burying his head up the Koch brothers depository to look into progressive causes — both in the state and beyond. He’s a corporate researcher enamored with markets.
He also works for BSU, which is a corporatist run institution. They stole land from Muncie Community Schools for future development. And the corrupt ‘state’ administration facilitated it, and the ‘board’ serving the people initiated no legal battles.
All organized in Indianapolis by corrupt politicians.
Ball Hospital and BSU’s presidents are the two leaders of an organization developed by the Ball Family trusts who still influence Muncie behind the scenes. This is the organization seeking a $42 million downtown development of high-end apartments and retail. They are acting as emergency managers for the community since our Mayor’s administration has been indicted by the FBI over the past three years.
So, which corruption is worse?
The Republican kind or the Democratic type? LOL
Meanwhile, they are extracting monies from the poorest citizens in the state. Our wages have been stuck in the 1990s — no more high paying manufacturing jobs. No more unions to protect workers. The workers are now straddled with high deductible medical plans, which are gouging them for profits.
Hicks took one for his fellow man this time, but will he follow it up with more economic research showing how our capitalist system is screwing the majority in favor of the Oligarchs?
Which institutions need democratically reorganized to serve the people?
#AllOfThem
Dave Kelleher – Thanks for that info!
Thank you Sheila!
There’s way too much money to be made. Just like with all the other various industries and commercial concerns here and elsewhere for anyone to expect them to diss their shareholders and their sense of competition with their peers is counter-intuitive and very wishful thinking. The lure of more profits but also new buildings and capabilities, new branding, career advancement, and everything that goes with it all is far too heady for them to ignore.
As someone who spent 14 years with Clarian Health/IU Health, I saw some of this first hand with the branding of Riley affiliates at our hospitals which was good in the sense that it opened new venues for patients and families that were closer to where they lived. However, along with it was this palpable sense of competition with the other “big boys on the block’ where many of us, particularly those like yours truly that had direct contact with our “customers” on the family support side of things, began to see it trumping everything else.
We were all obviously in the same “business” and there could have been collaborative care ventures aimed at helping patients and families, particularly those in the “special needs community” given their vulnerabilities, that physicians postulated on from all sorts of vantage points and we also thought about ourselves but the dollar signs trumped it all. They never happened.
Just like with many other concerns it makes one question why people are in this business, which is exactly what it is at that level, in the first place. The Hippocratic Oath and all that goes with it tends to be lost in the shuffle to a certain degree which is very sad since the spectrum and continuity of care can suffer as a result.
The old and very shopworn expression that “the business of America is business” is obviously applicable here but some things should transcend that mindset like access to healthcare but they don’t most unfortunately.
Tom Lund –
Hospital Administrators are business people. They do not take the Hippocratic Oath that physicians do. In the very rare occasion that a physician rises to the position of hospital CEO you can be assured that he/she has proven they are more interested in profit margins than in ensuring top quality patient care.
When you enter the Parkveiw North Regional hospital that was built a few years ago you almost get the impression that you are in a five star hotel. The entrance/atrium is expansive with floor to ceiling windows that are two stories high. A large wall at one end contains a gorgeous water fountain that is also two stories high to match the windows.
This area is unbelievably huge with vast wide open spaces that serve no purpose. The first time that I walked into the main entrance I was completely shocked at the vastness of the space and the beauty and immediately concluded there was no reason for such an expensive waste of space.
They recently built a Cancer Center that is connected to the main bldg. it is huge and beautiful on the exterior and I imagine the inside is most likely even more vast and beautiful than the main bldg.
Under the current national health care non system the industry will consume the country at a rate that might end it before Democrats can save it.
I got my nursing license in 1972. I am now a retired RN and substance use counselor. 500 of us lost our jobs in 2003 when St. Vincent’s cut 90% of their mental health and addiction services because we were not “profitable.” Should I choose to return to the work force, I would rather NOT be in health care due to what I believe is run away greed. Health care like every other business needs to make a profit. The question is how much profit must they have?
By the way, public health nurses have poor salaries. What that tells me is that this country does not understand that if we really want to reduce health care costs we need to invest much more in preventative health care and in systems that motivate people to maintain their health and well being.
And don’t get me started on how difficult it is to access treatment for mental health and/or substance use disorders due to the greed of health insurance companies.
Nancy, good comment on what I call “The Love Boat Hospitals” that have been constructed. All that space in these entrance/atriums has be hugely expensive to heat and cool. Then there is all the art work, and fountains.
Any way, there is no way to salvage or improve Obama/ACA Care. ACA, replaced the square wheels, with triangle shaped wheels. ACA is just a subsidy to Wall Street- Health Care.
The only program is Medicare for All or Single Payer. “Buy in Plans and Programs” are bogus. These “Buy Ins” still set up a multi-tier system of health care. Whenever you hear or see the word “Affordable” you know it will be multi-tier system.
The Plan recently announced by President Agent Orange will be a subsidy for Wall Street-Health Care.
Seema Verma, Centers for Medicare & Medicaid Services administrator, has been critical of Medicare for All, calling it not “just impractical but morally wrong.” She has frequently praised Medicare Advantage as a prime example of how government and private sectors can work together to offer affordable health coverage.
Seema, had her roots under Mitch Daniels and later Pastor Pence, which is why she favors the “Corporate Solution”.
There is only one way forward and that is Medicare For All or Single Payer, under these plans no one will go bankrupt trying to pay their medical bills or be forced to start a Go Fund Me solution.
To me the most patently absurd argument in all of health care is that private insurers save you money. Take a look at former Governor, now Senator from Florida, Rick Scott’s personal fortune. His $255 million net worth is almost all attributable to his time running Columbia Health Care and constitutes a small percentage of the salaries and bonuses paid to his executives while he served as CEO. An average healthcare CEO in America makes $18 million. Such organizations get rich by denying health care, not granting you your rights under your policy. The astronomical sums they deposit in their bank accounts are for one service – shuffling your health care paper work. Is the head paper shuffler worth such a vast fortune? With a little thoughtful programming, couldn’t a computer do the same?
Americans are pathetically under-equipped to understand their own self-interest. Democracy doesn’t and can’t work unless voters and consumers are well enough informed to know when they are being ripped off economically and politically. These modern purveyors of bureaucratic snake oil make the inventors of their craft look like pikers and the rest of us look like fools. Under our form of capitalism, a clever sales pitch beats a quality product almost every time.
Tom Lund: “the business of America is business”?
I don’t think that was the intent or conclusion of our founding fathers. I purport that the likes of Jefferson, Madison and Washington were much more interested in forming a moral, ethical, and fair America in which the “business” of the country was equity for all and oppression (governmental or corporate) for none.
Thus, I say that America–the real America–is gone, replaced by a false America for whom the business of the country is indeed business, especially the business of establishing maximum distance between rich and poor.
Virgil S., my neighbor from across Startzman Road, told me a disturbing tale about his wife Mable’s dog.
Virgil: I almost was lucky enough to get rid of that goddamn animal this morning.
Me: You shoot that dog and Mable will fry you in oil.
Virgil: No shootin’ to it; that dog by God died by its own self and I was good enough to do the burying while Mable cried and pulled the covers over her head.
Me: You said you almost got rid of it.
Virgil: Well, I thought it died. Mable thought so, too. Dog had convulsions and then by God it went rigid, like it’d been dead for days.
Me: So, you dug a grave?
Virgil: Yep, I did. A deep one, too, by God. I throwed the carcass in and commenced to cover it with dirt.
Me: And that’s when the dog came back to life; that’s funny, Virgil.
Virgil: By God, if’n I’d a got another shovel load of dirt on top a her, she’d have stayed dead; that’s for by God sure.
Virgil’s lament is the Republican lament, and the liberals, unionists, and working middle class is the near-dead dog. We can’t let the Republicans get that last shovel of dirt throwed in our grave.
Besides the millions that Ceo’s skim of the top, another reason for the high cost is for the cost of running the emergency departments. There is a significant % of uninsured who get their healthcare in that department, and cannot afford to pay. ER’s don’t turn anyone away. So guess who pays? It’s been called “creative billing” by hospital administrators! If we had single payer, everyone would be covered, with mega negotiating power of big brother. Business really fears government intervention, since they anticipate loosing their generous piece of the pie.
No matter what push back these providers attempt. The evidence will support the report. In the last 50 years three things have changed Not for profit hospitals (call themselves what they may) make far more money than needed for fens bling future operations. They made almost no money in excess of operations back then. Blue Cross/Blue Shield were non-profit mainly designed so hospitals and Docs got paid. All health insurance except Medicare A and B make huge profits. The Baby Boomers and the general population need record amounts care. Administrative costs because multiple insurance providers multiply process costs. Prediction: When these unbridled monopolistic tendencies reach full bloom , if Republicans are in charge, we will get national single payer plan that (A) buys all these profiteers at trillions in cost. ((B) or a single payer system with an extension the current Medicare Advantage system. The latter is an ill concealed fraud that is unsustainable without huge payments and government subsidies. Like making current inequities THE national health system.
My wife and I have often discussed “not-for-profit” organizations that often have revenues that can be measured in the billions (IU Health) and how they pay no property taxes. The Red Line Transit system was rerouted away from the more densely populated parts of the near Northside to run past the front door of IU/Methodist hospital. I know they are a huge employer, but I think you are completely on point.
IU Health is also heavily involved in the expansion of charter schools in Indianapolis, by direct donations to the schools themselves and the organizations (Mindtrust, Stand for Children, etc) that create the conditions to smooth their entry and growth, and also by placing IU Health employees on their boards. IU Health had a particularly close relation with now closed Carpe Diem charter schools, including it seems encouraging (lower income?) employees to enroll their children.
Many good people work with IU Health and provide much needed healthcare. How do we as a state resolve these issues?
We would all probably be better off by studying medicinal botany and find natural food sources to keep us healthier.
Modern medicine has become a hamster wheel of test after test in order to go through elective surgery — it is no wonder that private insurance is so expensive. Countries with universal healthcare triage health care access through nurse practitioners, physicians assistants and then yet another level of medical care such as physical therapy, dietary nutrition, and Rx for movement and general body exercises, including swallowing and corrective walking. The vast majority never see the top level of doctors, unless they need them. The long waiting lists are a myth. If you need a doctor, you get a doctor right away. Most people don’t need that level of care right away.
We can learn a great deal from other nations in how to have better health. (And now for my salad that has some wild garlic in it — )
We would all probably be better off by studying medicinal botany and find natural food sources to keep us healthier. An ounce of prevention is worth a pound of cure!
Modern medicine has become a hamster wheel of test after test in order to go through elective surgery — it is no wonder that private insurance is so expensive. Countries with universal healthcare triage health care access through nurse practitioners, physicians assistants and then yet another level of medical care such as physical therapy, dietary nutrition, and Rx for movement and general body exercises, including swallowing and corrective walking. The vast majority never see the top level of doctors, unless they need them. The long waiting lists are a myth. If you need a doctor, you get a doctor right away. Most people don’t need that level of care right away.
We can learn a great deal from other nations in how to have better health. (And now for my salad that has some wild garlic in it — )