Non-profit hospitals: yeah; right

Because most hospitals are non-profit, they pay almost no property taxes and no federal, state, and local payroll taxes. Had they made such payments in 2011, for example, it would have amounted to $24.6 billion. In truth, not-for profit hospitals are just as profitable as capitalist corporations, but the excess money they acquire isn’t called “profit.” It’s called “operating surplus.”

To maintain their non-profit status, they are required to provide “charity care and community benefit,” so the trick is to keep the tax benefit while spending the least amount possible on charity care and community benefit. One provision of  the Affordable Care Act (Obamacare) is the requirement that hospitals provide quantitative accounting of their charitable activities.  (Prior to the Act, they could just provide a brochure or something similar.)  Even with the new provision, many, if not most, are not providing near the amount of charity care that would justify their tax exemption. For example, 196 hospitals in California received $3.3 billion in state and federal tax exemptions but spent only $1.4 billion on charity care. They use various strategies to prove “community benefit, such as  “spurring the economy” with construction jobs, or creating a “healing garden.” What’s more, hospitals who care for charity cases are compensated by a federal program that allows them to buy all their pharmaceuticals at a discount, and Medicare gives them bonuses for treating higher numbers of poor people.

Some cities fight back. For example San Francisco passed a Charity Care Ordinance to ensure that hospitals do what’s right. For one thing, approval for new hospital construction depends on a review of the hospitals’ charity performance. In one instance, Sutter Health, had to agree to a variety of conditions, including spending at least $86 million per year on charity care, Medicaid, and services for the poor. All in all, the final package came to $1.1 billion. Apparently the price was worth it to hang on to its tax-exempt status.

Incidentally, the New York Times Magazine recently ran full-page ads for three hospitals, at the cost of $107,000 each. Mt. Sinai pays at least this amount weekly for a back cover ad. To me, that's immoral.

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