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.
Legal magic!!
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.
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