Speaking of health…
When I was still practicing law, I did a fair amount of work for nonprofit organizations.
Most of the nonprofits for which I drafted articles of incorporation or amended bylaws, or those I simply represented in various transactions, were “true” nonprofits–everything from Little League teams to small “do-gooder” groups focused on addressing a social ill. I want to be clear that I am not talking about those organizations, or criticizing their tax-exempt status–a status that was intended to facilitate the provision of socially-beneficial goods and services.
But. (You knew there was a “but,” didn’t you.)
There are also far too many “nonprofit” organizations that are really cleverly-veiled for-profit business enterprises. So long as talented lawyers can describe the business with language indicating a charitable mission of some sort, these enterprises escape both income and property taxation, padding what would otherwise be the bottom line.
And about that bottom line–rather than sending what are actually profits to shareholders or other investors to be taxed, as for-profit enterprises do, sizable chunks of those dollars are used to inflate the salaries paid to management personnel (who–surprise!– often were the founders of the organization), transforming them into expenses of the enterprise.
Back in my lawyering days, this was one of the many things that royally pissed me off. I revisited that annoyance when I read a recent article by Michael Hicks in the Capital Chronicle. Hicks has periodically focused on the economic shenanigans of Indiana’s hospitals–all of which are theoretically nonprofit, and many of which actually are.
Hicks reminds us that the benefits bestowed by nonprofit status are in exchange for the “well established notion that nonprofits advance the public good.”
Today, nearly every hospital corporation in Indiana is a not-for-profit. I’m pleased to report, that insofar as I can judge from the data, most are focused on that well established notion of ‘advancing the public good.’
In fact, it would seem that only five or six of Indiana’s not-for-profit hospital firms have dispensed with any pretense of “advancing the public good.” Now, this doesn’t mean they aren’t doing good things that folks are willing to pay for. But, so do Walmart, J.P. Morgan Bank, Amazon, and McDonalds. One key difference is that we tax these for-profit firms.
Hicks then tells us that, in 2020, the nation’s largest for-profit hospital, HCA, reported a 7.3% profit. That same year, Ascension Health in Indiana reported a 41% profit, Community Health Network reported 23.3%, IU health reported 22% and Deaconess reported 13.8%. As he writes, this is flagrant misuse of the not-for-profit status.
If these were for-profit firms, their investors would’ve had a windfall. Instead, they put that money in money market accounts, or offshore investments. That money should flow back into Hoosier communities instead of leaving the state. The losses are startling. Roughly 60% of all the economic growth in Muncie over the last decade was swallowed just by the profits of IU Health and Ball Memorial Hospital.
The article then focused on Ascension St. Vincent, which recently announced plans to close 11 clinics in Indiana.
Now, I’m sure this was a random coincidence that had nothing to do with pending legislation aimed at their monopoly power. If reporting is true, most of these clinics were profitable. Of course, system-wide, Ascension is fabulously profitable. In the last year for which we have data, they reported making a profit of more than $308, 000 per employee, less than half of which was from healthcare services. Ascension Health is today a financial services firm that claims heritage from Catholic charities, but now only dabbles in healthcare.
The decision to close less profitable clinics would be a typical business decision of a venture capital firm. But, it is wholly incompatible with the “notion that nonprofits advance the public good.” Ascension is a ‘not-for-profit’ entity in name only. Its behavior is that of a large conglomerate. They are not alone. In 2020, IU Health reported a tad more than $4 billion in physical assets in Indiana. Their investment holdings were $7.8 billion. They also made $49,600 per worker in profits in 2020.
There is much more data in the article, all of which supports Hick’s thesis that “these big ‘hospitals’ are really just large financial services firms, who own construction firms, physician offices, restaurants and yes, hospitals.” If Indiana had a legislature that focused on the welfare of Hoosiers, that body might remove the nonprofit status of systems behaving like venture capitalists.
Removing the not-for-profit status would generate huge tax dollars for cities across Indiana, expose these hospitals to federal laws on non-compete and increase the probability of enforcement of anti-trust regulations.
Welcome to yet another aspect of privatized health care…It costs Americans a lot to reject the “socialism” of a national health system.
23 thoughts on “Health And Wealth”
“So long as talented lawyers can describe the business with language indicating a charitable mission of some sort, these enterprises escape both income and property taxation, padding what would otherwise be the bottom line.”
This clever “padding” is done through legal loopholes by clever lawyers following the letter of the law (staying barely inside the law) and avoiding the heart (meaning) of the law. This is why Trump repeatedly during his administration cried “Where is my Roy Cohn?”, why he couldn’t find and keep an AG for long and his was a revolving door administration. Health care; rather denying health care primarily for women, was and is a continuing basis for his GOP foundation. I find it ironic that denying health care and supporting lax gun laws go hand-in-hand regarding the death rate in this country. Ordering unnecessary and super expensive testing and unnecessary in-patient hospitalizations are part of the “padding” element. Trump’s part in allowing Covid-19 to reach Pandemic levels in this country was and is a major part of the health care corporation profit status and Big Pharma continues raising cost of medications to cover the loss of numbers of those who can no longer afford to buy they products.
I had a necrotic ulcer on one big toe; the bills for the circulatory testing by a specialist, testing and “treatment” in the Methodist Hospital ER (Bacitracin and a band-aid), plus the actual treatment by a Podiatrist totaled over $22,000.00.
“Welcome to yet another aspect of privatized health care…It costs Americans a lot to reject the “socialism” of a national health system.”
What are we willing to lose in order to hold hospitals accountable for local, state and federal taxes? IU Methodist Health is among the largest hospitals in the nation located here in Indianapolis. It is a teaching hospital with abundant investment in medical research that requires recruitment and retention of highly skilled personnel. We live in Canada half the year and yes we can get healthcare for less even without eligible insurance. But we are relatively healthy. If we need specialty care, we would need to travel south of the border. People who can afford travel from around the world come to US healthcare for specialized treatment. You want to tax our healthcare system? What then are we willing to give up?
A professional letter is out there rebutting Hick’s claim since he used tax returns instead of audited financial statements, which were available. He didn’t call Hicks a “cherry picker” but was insinuating it.
Anyway, I support Hicks in his endeavor with the hospitals. When running for City Council, I demanded a PILOT fee from Meridian Health, IU Health/Ball Memorial Hospital, and Ball State University (all in my district). The local Democratic Party HQ cut off that section of my door hanger before handing it to their people. LOL
We are idiots. We even let the YMCA operate as a non-profit when it is no different than any other fitness center. Ball State also has a fitness center open to the public. It should be taxed on that space.
The problem is the Ball Family is the OLIGARCHY in East Central Indiana. Writing negatively about them gets you blackballed.
Just for the record, they also owned slaves via several plantations in the South. Reparations?
p.s. I noticed Hicks wrote that article without his usual Ball Family endorsement.
Thanks for writing this. I’ve complained for years about non-profits.
There is a non-profit charity issue I wish I could publicize. I have a 91 year old mother. She is bombarded with charity fundraising direct mail. I’ve talked to others who have older parents.
They say the same thing – that they deliberately target older people for solicitations. My mother will want to send them some money – not a lot – say $25 because it’s “for a good cause.” I keep having to explain that just because something is a good cause that doesn’t mean the money goes to that cause.
My mother gets more mail – almost all charities seeking money – than I do in one day than I get in a week. She also is constantly hit by political candidates – most from out of state – for money. She is solicited by Democrats, Republicans, liberal and conservative organizations.
There is no way of stopping these direct mail solicitations. Because it’s not first class mail, the post office won’t return it if you write “refused” or “wrong address” on the envelope. There is not a no mail list you can get on that makes it mandatory that these companies stop sending out solicitations. There is such a list, but it’s totally voluntary on whether these fundraisers comply.
The way these fundraisers target seniors with direct mail solicitations is scandalous.
Todd, you wrote: “We are idiots. We even let the YMCA operate as a non-profit when it is no different than any other fitness center. Ball State also has a fitness center open to the public. It should be taxed on that space.”
According to IRSHA, the trade association for commercial fitness centers, 25% closed during COVID. Their business plans that included profit sharing with owners and share holders did not meet self imposed metrics for profit. YMCAs on the other hand remained opened ramping up affordable childcare, expanding diabetes prevention (BTW … supported by evidence researched by IU Methodist), collaboration with Gleaners to distribute nutritional food to elderly, reduced footprint of workout stations to promote social distancing, aggressive promotion of CDC protocol to prevent spread of COVID, reinvested in air comfort and management systems, increased commitment for subsidized membership for greater affordable access based on substantiated need … and no local YMCA I know of closed during COVID.
The YMCA never criticizes commercial fitness centers for their return of revenue treated as profit that enures to financial gain enjoyed by owners and shareholders. Revenue returns of the YMCA are invested in locations with higher density low income populations and reserves to maintain facilities regardless of economic downturns.
The YMCA works to earn public trust and its tax exemption each and everyday. That is why it has demonstrated staying power in local communities throughout the world in 120 countries since 1844.
For nearly 20 years I worked in the “not-for-profit” world. All but one organization lived up to its name and toiled at the social problems they proclaimed to address. The best of them yearly held a gathering of all paid and volunteer participants to re-evaluate where they were in their mission goals. Straying from their mission was called “losing the mission” and was to be avoided at all costs. The outlier organization I worked for was run by a man who made running not-for-profits the center of his career. It didn’t matter what the stated purpose of the organization was, as long as he was mightily paid. Once he had milked a place for all it was worth and burned the place down along with his reputation, he moved onto a new city to do the same thing all over again.
The hospital not-for-profits named in today’s blog seem to fall into that outlier group. They all have lost their mission and should be forced to lose their tax exempt status.
the near small town hospital here in NoDak has been as with SoDak bought up and closed. over my 37 years here in both states ive watched the big corp ;ike sanford buy out and shut down for their own growth. imagine 200 miles to a hospital for critical care. the sanford name is chisled literally in sioux falls sodak, (yea,where offshore money from,other countries hide their wealth.)the issue is the complete goverments of both state trippin over their dicks to allow sanford to dominate the medical needs here. one small clinic i frequinted because they provided truckers physical,and the docs were all cool. called independant doctors. (bismarck,nd)The Dr. i was assigned to was open minded and looked to provide over status. one day i got a letter stating they were closing. i made an appt to confer where he was headed, and why they didnt buy out the owner and go full tilt independant? he said,, they were called into a meeting with no notice, the owner of said building and i would say the biggest investor, (he also owns and operates most of the retirment/nursing homes here in NoDak,) without warning, in August,that the place had been sold and all materials and records have already been sold to sanford. no chance at all for the docs to buy it up and stay independant. seems this is a trend by CHI also. dominate over needs. most of the docs who i was assigned to at CHI,never stayed for more than a year,and moved on. im talking about 10 docs in 12 years. one con by CHI hey,come down and meet your new doc! i never see them,it was all p.a.s and staff. medicare paid for that..today if your in outlander here,if you have bcbs or a big time,insurer,you get medi flights.if its a discount con provider,you get a ambulance for hundreds of miles. there are just a few insurers allowed in NoDak.no competition. the state legislature likes it that way..
The very idea of not-for-profit hospitals makes me laugh. Those that don’t make a profit are quickly closed, regardless of any public good.
I have worked in the health care industrial complex for over 30 years now and can attest to the fact that these “non-profits” are definitely FOR PROFIT! An accountant friend of mine used to work for St Vincent back in the 90s (before the MBAs kicked all the nuns out and turned it into “Ascension”) and when asked about their non-profit status he would just smile and say “don’t worry about them, they ARE making huge profits from health care” and it doesn’t go into the nuns retirement fund! Needless to say, the for profit health care industrial complex in this state and country has gotten way out of control since then…just ask the criminal Rick Scott of Florida who presided over the biggest Medicare fraud in US history but instead of being broke and in jail the ahole is in the US Senate and a mega-millionaire! Can’t wait to retire next year and move permanently to our lovely little casita in the mountains of Costa Rica before the 2024 elections where we will watch from afar the continuing slide of America into fascism…
I’ll just leave this here:
Boy, is the U.S. healthcare system exceptional, or what?
We don’t want to know what the top execs of these “non-profits” make…right? And how about the “non-profits” that donate dark money to politicians/parties?
How about certain retirement systems that follow that same model… almost. Texas’ TRS claims to be investing contributions to ensure that the fund remains “healthy”. When I retired into the TRS in 2007, the fund was worth over $130 BILLION. And yet, as of this date, no retired teacher has received a penny more in benefits since 1999, while the top six or seven “executives” (Their euphemism for sound investment minds) pull in seven figure salaries. Of course, the TRS was separated from other state employees’ retirement funds during the G. W. Bush years just as he launched the all-punishment-all-the-time No Child Left Behind fiasco. That “thing” cost Texas taxpayers over $400 MILLION per year – I’ve seen the contract.
But to the point of today’s blog: EVERYTHING REPUBLICANS TOUCH TURNS TO CRAP FOR EVERYONE EXCEPT REPUBLICANS.
JoAnn, I can’t believe 22k for a toe injury. Yikes.
I had bicep tendon surgery in January and two nights in the hospital, two surgeons and whatnot, my bill was 3500 francs (which is the same ratio as dollars right now 1:1). My deductible was 500. I pay about 500 a month in premiums and 10% for prescriptions.
For Profit Health care should be illegal. If only the GOP would have allowed single payer on the Obamacare plan, we could have had decent healthcare in the states, but no, we can’t have that!
Speaking of non-profits…
“Harvard University will rename its graduate school of arts and sciences after the billionaire hedge fund executive and Republican megadonor Kenneth Griffin, the institution announced yesterday, after a $300m contribution brought Griffin’s total support of his alma mater to more than half a billion dollars.” Ivy league or ivy weed?
I didn’t know not for profits were in fact investment profit centers. My beef was that their execs were making a bundle under the guise and out of not for profit profits immune to taxation. Perhaps we need amended language in what is required to meet the not for profit status, like taxation of profits over a certain amount, limitations on executive compensation etc.
I thought the description of MBAs taking over from nuns via Ascension as a new way of beating the tax rap striking and memorable. Bravo to Michael Ryan! In the eternal battle of greed versus the cross, guess who wins?
Vernon; Indiana is currently playing the same games with Public Employee Retirement Fund (PERF) which included public employees, teachers, judges, police officers, firefighters, Excise, Gaming & Conservation Officers, prosecutors and legislators. Our monthly retirement checks have been lowered twice in the past 10-12 years. We are waiting for the Republican Indiana Senate to vote on the bill passed by the House to reinstate our 13th Check. Being a bright red Republican state; the majority of retirees are probably elderly Republicans.
AgingLGirl; My toe became infected a few days before Christmas a few years ago; at the family Christmas Eve dinner my daughter-in-law who had formerly worked as a nursing assistant, her mother who was a Physician’s Assistant and my granddaughter an RN in the Riley Hospital pediatric heart surgery department all agreed it was a necrotic ulcer. My daughter-in-law contacted my primary physician the morning after Christmas and we were told to come to her office immediately. The doctor confirmed the necrotic ulcer and scheduled an appointment with a circulatory specialist as soon as we could get to the office in the building behind Methodist Hospital. For some reason they did a full body circulatory exam and scan; we were told to wait for word from my doctor who was dissatisfied with the test results and sent us to Methodist ER who repeated some of the tests just done and hours later we left with the same diagnosis and told to see a podiatrist. When I received copies of the bills the circulatory testing was over $12,000.00, the ER bill was over $8,000 and the podiatrist testing and removal of the necrotic ulcer was over $2,500.00. My out-of-pocket costs were only about $350.00; Medicare and my Medicare Supplemental coverage through IU Health Care was billed for the balance.
My in-patient hospitalization from the ER with viral flu, severe dehydration and UTI was diagnosed by the ER doctor as heart disease even though I told countless doctors and hospital staff I have never had chest problems of difficulty breathing. In-patient was ordered after a number of tests had resulted in normal results. The follow-up appointment with the Methodist Hospital Chief Cardiac Surgeon, who also examined me and gave me the all clear test results during my hospital stay, told my all problems were due to the severe dehydration. He had released me about 30 minutes after the ER doctor told me he had scheduled me for more testing the following day and I would not be released. A few weeks earlier “60 Minutes” reported that many ER physicians across the country were being trained to order as many expensive tests as possible, refer 20% of all ER patients to in-patient and 50% of all senior ER patients to in-patients and continue ordering expensive testing.
Worked as a nurse for 30 years all of those years for non-profit hospitals. Part of my MPA courses I was able to take courses under public health. I also worked closely with a clinic at Riley–IU clinic located at Riley. My husband now works as an auditor for hospitals, prior to that he was state board of accounts for Indiana and then moved out of the gov’t into industry.
Just giving the background–first, the rural hospitals due to the lack of jobs that offer insurance through private for-profit insurance companies like a Blue Cross etc..their percentages come from Medicaid and Medicare and Medicare Advantage (run by those for-profit insurance companies). If the primary source of income is w/ Medicaid and Medicare–you are not breaking even. The clinic I worked for at Riley, we were at 65% Medicaid and so we could not pay for salaries or to keep the lights on and so the doctors did contract work at places like Damar/IDTC as well as research. Now, NIH research $ cannot go towards rent but industry $ can (aka: research on behalf of drug companies, etc…) so between contract work and some research $, it helped keep the clinic afloat and helped pay for people like me.
I worked for IU Medicine for 10 years and five of those years there was a pay increase. My husband says the profits are pennies on the dollar from what he is looking at because billions are being spent on these electronic medical records, keeping up with technology, and millions and billions increasing salaries to match what HCA provides. (Nashville is the HQ for HCA) Your for-profit hospitals where the money goes to shareholders can be very selective as to who they will see and who they will not see. You may enter their ER but that doesn’t mean they will admit you onto the floor.
Nonprofit doesn’t mean no profit–the money has to go back into the system–salaries and the amount of $ that are considered charity care is considerable. Remember regardless of if you do or do not have insurance the hospitals have to see you. An uninsured person is not going to pay the bills and the gov’t doesn’t reimburse to the level to cover the costs. There are certain fields in medicine that are always in the red–psychiatry, neurology to name a few and so the money from cardiology that insurance will cover helps cover the financial drain of the other departments. There is a reason why you it will be hard for anyone with medicare to find a psychiatrist, psychologist, or therapist outside of a medical center (aka: private practice) to see you.
Covid has placed a significant strain on any ‘profits’. The money spent on travel nurses have been significant. The academic medical center I am working for stayed 99% full, but they had to use travel nurses–whereas other places had to lower their offerings (you know waiting at least 6 months to see a specialist) but we are now on a hiring freeze with the exception of direct patient care staff.
I get it–when you see where ISU has bought up most of north Terre Haute which was beyond poverty and the city is not getting tax $ on that property (they were not getting it from the impoverished either.
Oh–and regarding the high bills–the bill maybe $20, 000 but insurance has already negotiated with the hospital what they will pay and it may be $10,000 and the use of nurses which are considered a drain is never included into the mix of $ in healthcare.
Sorry–there was not a pay increase for 5 out of those 10 yrs.
Thank you to you and Michael Hicks for exposing this.
My hubby the CPA/Auditor took a look at the article and questions the report. He called the author an “idiot and is not an account– Hubby doesn’t know of any industry making 41% in profit but it certainly not in healthcare. HCA is the most profitable healthcare in the country and I.U. Hospitals are no where close to effective in generating profits.”
He goes on “I like the 7.8 billion in assets. I would guess most of this is donations that are in a trust. 4 billion is physical asses. How much debt is associated with that property? This guy does not know a thing about accounting. Investments are not profits.”
I reached out to him as that report didn’t make any sense to what I have seen, noted, and lived through while working in healthcare.
Great info Elaine.
JoAnn, I’m glad your share was somewhat manageable and should have been the total bill, instead.
Elaine, thank you for explaining what I know but couldn’t explain.
I liken for- profit to private schools, who select the students (patients) they want; and non-profits as our public schools, who take everyone in and do the best they are able for all.
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