By Bethany Blankley | The Center Square
At the same time, salaries for administrators and executives at hospitals were as high as $21.6 million. Six CEO’s earned between $10 million and $21.6 million.
“Charitable hospitals and their CEO’s are getting richer, while the American people are getting healthcare poorer,” the Open the Books report says.
Of the 82 hospitals surveyed, only eight executives earned less than $1 million at organizations including the Mayo Clinic, Cleveland Clinic, Kaiser Foundation, Dignity Health, and Partners HealthCare. Last year, the CEO of Banner Health earned a salary of $21.6 million.
OpenTheBooks.com argues that these 82 non-profit hospitals “may be gaming the tax code for their benefit.”
The report found that the total combined net assets of the 82 nonprofit hospitals analyzed was $203.1 billion annually; their combined assets’ percentage of growth was 23.6 percent. In one year, their assets grew from $164.2 billion to $203.1 billion. Their combined “return on investment” was 20.5 percent.
Their combined lobbying efforts totaled $26.4 million.
By comparison, the analysis found that the five largest publicly traded for-profit U.S. hospitals had $96 billion in revenues in 2018 with a net asset growth of $600 million. The increase in their combined assets in one year was 1.5 percent.
In 1970, healthcare amounted to 7 percent of the U.S.’s gross domestic product (GDP). Today, estimates project it accounts for 20 percent of the nation’s GDP.
In the wake of President Donald Trump’s new federal rule requiring hospital cost transparency, Adam Andrzejewski, CEO/Founder of OpenTheBooks.com, told The Center Square the president “took the first step toward shifting more power to patients and breaking up healthcare monopolies.”
OpenTheBooks.com asks why these organizations are “legally characterized as a nonprofit?” He says such a designation “doesn’t make sense.”
“We’re not proposing a salary cap,” Andrzejewski told The Center Square. “We’re simply saying that taxpayers have a right to question why their dollars – directly or indirectly – are financing the salaries of highly compensated hospital nonprofit CEOs, particularly as costs are increasing for patients.
“Make no mistake, these are lavish salaries conferred by hospitals that are organized as charities,” he added. “Salaries this high drain dollars away from the core mission.”
The charitable hospitals receive billions of dollars in government funding, grants, and Medicare/Medicaid payments and in turn are paying their top executives between $5 million and $21.6 million every year, the report notes.
Andrzejewski told The Center Square, “Their nonprofit status is an indirect tax increase on everyone else who doesn’t enjoy their status. We’re paying higher rates to keep their rates low. After all, these non-profits pay no income taxes, or property taxes, and raised over $5 billion last year in tax-deductible contributions from donors.”
The American Hospital Association lobbied hard against Trump’s transparency order and subsequent rule change, arguing that being required to provide price information to patients goes “well beyond what Congress intended and would seriously harm patients, hospitals and other healthcare providers,” referring to the 2016 21st Century Cures Act.
The AHA argues making available costs would disrupt their negotiations with health insurance companies. Instead, patients should be provided with information about out-of-pocket costs, not information about providers’ negotiated rates with health plans.
“Failing to disclose the prices of health care procedures and services harms individuals with chronic conditions trying to afford care, raises premiums for individuals and businesses, and harms the uninsured,” Josh Archambault, visiting fellow at The Opportunity Solutions Project told The Center Square. “Every dollar wasted on overpaying for health care is one less dollar for Americans to pay for gas, food, or education expenses. If we truly want a patient-focused health care system, increasing price transparency is a vital first step.”
OpenTheBooks.com identified the Kaiser Foundation, Partners Healthcare, University of Pittsburgh Medical Center Group, Mayo Clinic, Dignity Health, Cleveland Clinic, Ochsner Clinic Foundation, Providence St. Joseph Health, Banner Health, and Intermountain Healthcare Health Services Inc. as big spenders on administration.
In response to OpenTheBooks.com, the Mayo Clinic said excess revenue is used on research and other programs that benefit patients.
“Mayo Clinic is a dedicated and mission driven nonprofit that confers strong community benefit through providing hundreds of millions of dollars in charity and other uncompensated patient care,” the clinic responded, according to reporting on the topic at Forbes. Any excess revenue supports cutting-edge programs in research and education that benefit patients everywhere.”
The Cleveland Clinic offered a similar response.
“Cleveland Clinic was founded as a nonprofit group practice with a mission to care for the sick and improve patient care through research and education,” it said. “Any and all extra funds from operations are invested back into the health system to fund new research and education initiatives and to continue our long-standing charitable efforts. In 2017, our Community Benefit contribution totaled $906.5 million.”
According to the researchers at the Harvard T.H. Chan School of Public Health, the Harvard Global Health Institute, and the London School of Economics, significant hospital spending goes toward planning, regulating and managing medical services at the administrative level.
In their recent report published in the Journal of the American Medical Association, they write that Americans pay nearly double for similar services than do residents of other industrialized countries. Costs are higher for physician and hospital services, diagnostic tests, prescription drugs, and for “administrative complexity.”
Their report found that despite higher spending, the U.S. has worse population health outcomes, and worse access to healthcare than other industrialized countries. In 2016, it states that the U.S. spent 17.8 percent of its GDP on healthcare compared to other countries’ GDP percentages. Australia’s was 9.6 percent, Switzerland’s 12.4.
“Life expectancy in the U.S. was the lowest of all 11 countries in the study, at 78.8 years,” the report states. Other comparable countries’ ranged from 80.7 to 83.9 years.