Rep. Bill Thomas (R-California) said, "We really can't tell the difference, all that much, between a for-profit and a not-for-profit. What is the taxpayer getting in return for the tens of billions of dollars per year in tax subsidy?" Sen. Charles Grassley (R-Iowa) said "It's also my job to make sure charities are earning their generous tax breaks. Tax-exempt status is a privilege."
Mark Everson, Commissioner of the Internal Revenue Service, testified "We at the IRS are now faced with a health care industry in which it is increasingly difficult to differentiate for-profit from nonprofit health care providers." The article further explained, "IRS reviews have turned up questions about excessive executive compensation, complex ventures with profitable companies, employment taxes and operations benefiting a private, not public good."
I am not surprised that politicians are beginning to question why supposedly "not-for-profit" hospitals should keep their privileged status. Since I first did the interviews that resulted in my European Journal of Internal Medicine article on health care dysfunction, I have heard about case after case about questionable leadership of large health care organizations, including many that involved not-for-profit hospitals. Just this month, for example, Health Care Renewal postings have included cases of :
- exaggerated and possibly misleading advertising (here and here);
- charging inflated "list prices," since managed care organizations think they are getting a bargain when they apply fixed discounts to whatever the hospitals want to charge, even if poor, uninsured patients are then charged full "list prices" (see here, here, and here); and
- miscellaneous fraud involving Medicaid billing (here), and construction kickbacks (here)
Of course, ending all not-for-profit hospitals' tax exemption would be an exceedingly blunt way to address these problems. I have no doubt that there are many competently and honestly lead hospitals, whose leaders make real efforts to fulfill their missions, and to add real value to their communities. They do not deserve to lose their tax exemptions. However, they risk being thrown in the same bucket with their "bad apple" brethren. Up to now, hospital leaders as a group have not made readily apparent attempts to police their own ranks.
Thus, we need some better watchdog and/or regulatory mechanisms to address ill-informed, conflicted, and corrupt leadership of not-for-profit hospitals, (and of other health care organizations). Perhaps hospital leaders will develop develop a self-policing mechanism. Perhaps these mechanisms could be set up by physicians and other health care professionals, or as part of government regulatory agencies. However, not having these mechanisms means that continuing abuses will tempt politicians to employ indiscriminate, shot-gun approaches which will harm the good apples along with the bad.