“The combined net income of the 50 largest non-profit hospitals jumped nearly eight-fold to $4.27 billion between 2001 and 2006, according to [an] … analysis of data from the American Hospital Directory,” the Journal reports. While the data analysis shows that many inner city non-profits, which handle large numbers of uninsured and Medicaid patients, are struggling to survive financially, it also shows that “77 percent of the 2,033 U.S. non-profit hospitals are in the black, while just 61 percent of for-profit hospitals are profitable.”
Non-profits are channeling that extra money into building, purchasing equipment, rewarding executives with large salary packages and generally padding out their “treasure chests.” The Journal notes that construction spending for non-profit hospitals has more than doubled since 2000, from just under $15 billion to $30 billion in 2006. In addition, the top non-profit CEOs are earning in the $3.5 million to $5.5 million range annually.
There are about 3,400 hospitals nationwide. About 60 percent of those are non-profit; 23 percent are for-profit; and 17 percent are run by county, state or federal government, according to a sidebar. A Congressional Budget Office report issued in Dec. 2006 reveals that all hospitals receive about $32 billion in federal, state and local subsidies each year, and that non-profit hospitals receive another $12.6 billion annually in tax exemptions. Further, reports the Journal:
“In return for not paying taxes, non-profit hospitals are supposed to provide a ‘community benefit,’ a loosely defined requirement whose most important component is charity care. But many hospitals include other expenses in their community-benefit accounting to the Internal Revenue Service, including unpaid patient bills. Often, hospitals also include the difference between the list prices of treatment they provide and what they are paid by Medicaid and Medicare …. Excluding those other expenses, many hospitals spend less on charity care than they get in tax breaks, studies by various counties and states show.
One non-profit hospital system, St. Louis-based BJC HealthCare, counts the salaries of its employees as a community benefit. BJC … says on its Web site that it provided more than $1.8 billion in benefits to various communities in 2004. Its payroll, including its CEO’s $1.8 million compensation, accounted for $937 million of that figure, while charity care represented $35 million, according to BJC.”
Non-profit hospital executives interviewed for the report say they need cash on hand to cover unpaid bills, lower debt levels, provide retirement and other benefits to employees, and invest in infrastructure, technology and other capital expenses in order to remain competitive.
New IRS standards set to take effect in 2009 will require non-profits to itemize their community benefit contributions. These are reporting requirements only, and do not set rules for types or amounts of charity care.
