We have periodically posted articles about the issue of why Lake County taxpayers should still be required, after 40 years, to be taxed to give about $11-million to the two major, local Hospitals, including Florida Hospital Waterman, owned by Adventist Health System.
You can see all our articles on the North Lake County Hospital District by clicking HERE.
One of the arguments for stopping the tax is that both "non-profit" hospitals are now making serious profits, spending millions on optional marketing programs, and why should taxpayers continue to be subsidizing them when they are not really "non-profits" anymore.
Well, today the Orlando Sentinel had a front page article asking a similar question "Are nonprofit hospitals truly not for profit?"
You can find it HERE, or below.
Favorite quote:
But in the high-dollar world of health care, what does it mean to be a nonprofit hospital that makes big profits?
"If you go back 100 years, these were charity hospitals. They took care of the poor," said Frank Sloan, a professor of health-care economics at Duke University. "But as health care has grown, they've become commercial. Now these nonprofits are in a big business."
And, here is another quote:
In 2008, in documents provided to the state of Florida, Florida Hospital reported spending $442 million — or 7 percent of its patient revenues — on charity care. Its competitor, nonprofit Orlando Health, spent $213 million — or 4 percent of its patient revenues — on charity care.
Florida Hospital accepts more Medicaid patients than any hospital system in the state except Jackson Memorial in Miami, said Richard Morrison, Florida Hospital's regional vice president for governmental relations.
Yet the amount of charity care the hospitals are providing is unclear, said Becky Cherney of the Florida Health Care Coalition. If the hospital performs an appendectomy on an uninsured person, she said, hospital officials may write off the "full price" of the care at $11,000, but insurance companies, which negotiate rates, pay about half that. So what's the real cost to the hospital?
"When they do their charity care, they take the whole $11,000," Cherney said.
And everybody in the business, said Berg, "knows that that's a make-believe number."
The article supports the theory stated by local activist and NLCHD Board member Marilyn Bainter, that hospitals, including the above named parent, Adventist Health Care, of one of our local hospitals, claim to be non-profit, when they are really making tons of money and still pleading poverty to get subsidies from taxpayers. So, she asks, why should local taxpapers still be taxed to provide subsidies to these hospitals?
Just this week, the other local hospital, Leesburg Regional Hospital, announced a deal to build TWO new cancer centers, with one in the Villages. Why should a hospital receiving tax subsidies from only Lake County be spending any money to build a hospital or staff it in the Villages, which is in Sumter County which does not tax their residents for hospital subsidies?
My own opinion, stated previously, is that another reason to eliminate the Lake County Hospital tax is that...
the law giving the tax to the hospitals contains no deliverables, no audit trail requirements, and no specific performance measurements in order to get the subsidies. Thus, the hospitals can spend your $11-million on just about anything, like building facilities in another county, or sending the funds to a parent company, and not even have to show an audit trail where it was spent.
You can see all our articles on the North Lake County Hospital District by clicking HERE, or clicking the North Lake Hospital District category heading in the "pages" section at the right.
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From the Orlando Sentinel August 1, 2010
Are nonprofit hospitals truly not for profit?
Tax breaks rankle some critics, who ask: "What are you giving the community?"
When Florida Hospital
and United Healthcare started their public wrangling over a new
contract this summer, each side pointed to the other company's profits.
Both companies are health-care behemoths. Minnesota-based United
Healthcare is the largest health insurer in the United States, with
profits of $3.8 billion in 2009. Adventist Health System, which operates
Florida Hospital system, is the largest nonprofit Protestant
health-care provider in the nation, operating 37 hospitals in 12 states
and generating $363 million in profit in 2009.
But in the high-dollar world of health care, what does it mean to be a nonprofit hospital that makes big profits?
"If you go back 100 years, these were charity hospitals. They took care
of the poor," said Frank Sloan, a professor of health-care economics at Duke University. "But as health care has grown, they've become commercial. Now these nonprofits are in a big business."
Today's nonprofit hospitals — which make up slightly more than half of the nation's 5,000 community hospitals — are trying to juggle the demands of making money with being a charitable organization.
"You're supposed to show a good bottom line, but at the same time you're supposed to show that you lost tons of money by giving charity care," said Jessica Berg, a law professor at Case Western University who has studied the nonprofit-hospital system and its tax structure. "We're used to thinking of churches and religious organizations as nonprofits — whoever thinks of a for-profit church?"
For legislators across the country, there's growing tension that massive nonprofit-hospital organizations don't pay any taxes.
"The question is: What is the nonprofit doing that for-profits are not? We're giving them a huge tax benefit," Berg said. "So what's the trade-off? You're not paying taxes, so what are you giving the community?"
Charity care
For nonprofit hospitals, much of the community benefit is measured in two ways: through charity care and "community-benefit programs," which can range from health fairs to glaucoma screening. At Florida Hospital, those programs also include a diabetes-prevention program among Hispanics in east Orange County and a congestive- heart-failure clinic for those with Medicaid or no insurance.
Charity care — the free care that hospitals provide to those with no insurance or the amount of a bill they write off because the patient is unable to pay — has come under more fire from legislators across the country as questions arise about how much the hospitals are writing off.
In 2008, in documents provided to the state of Florida, Florida Hospital reported spending $442 million — or 7 percent of its patient revenues — on charity care. Its competitor, nonprofit Orlando Health, spent $213 million — or 4 percent of its patient revenues — on charity care.
Florida Hospital accepts more Medicaid patients than any hospital system in the state except Jackson Memorial in Miami, said Richard Morrison, Florida Hospital's regional vice president for governmental relations.
Yet the amount of charity care the hospitals are providing is unclear, said Becky Cherney of the Florida Health Care Coalition. If the hospital performs an appendectomy on an uninsured person, she said, hospital officials may write off the "full price" of the care at $11,000, but insurance companies, which negotiate rates, pay about half that. So what's the real cost to the hospital?
"When they do their charity care, they take the whole $11,000," Cherney said.
And everybody in the business, said Berg, "knows that that's a make-believe number."
Hospitals on a spree
Though for-profit hospitals send their profits back to shareholders, nonprofit hospitals can pump those profits into community-health programs, charity care and financing new technology and buildings.
The hospital system has invested in liver- and heart-transplant programs, which are not moneymakers, Morrison said. And, to support the new University of Central Florida medical school, Florida Hospital has expanded the number of medical residents it accepts — at its cost.
"You put money into services that the community needs, but that are not necessarily something you would invest in ordinarily," Morrison said.
In the past decade, Central Florida's two competing nonprofit-hospital systems have been on a building spree, trying to gain market dominance.
Florida Hospital has increased the size of several of its existing hospitals — for example, the recent 300-bed expansion at Florida Hospital Orlando — and expanded its reach into other counties with its network of 18 hospitals. In June, Florida Hospital executives signed a five-year operating agreement with Bert Fish Medical Center in New Smyrna Beach with an option to buy the hospital. In the Tampa area, Florida Hospital is negotiating to buy three hospitals and a long-term-care center.
Orlando Health operates six hospitals and partially owns two more, one in Osceola County and another in Lake County.
"These are turf wars," Cherney said. "We have two competing systems, so they both want to be sure they're in the right place. And Florida Hospital is very aggressive about the turf war."
The problem, she said, is that nonprofits such as Florida Hospital and Orlando Health also are buying doctors' practices and lab services, squeezing out competition.
"They're not just buying hospitals," Cherney said. "They're buying doctors' practices that operate in these hospitals — and then that's a true monopoly."
Hospitals in such an arms race "probably overbuild, over-technologize, and quality often will go down," said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance.
Once they invest in expensive technology like robotic surgery systems or MRIs, hospitals have to use the machines frequently or raise rates.
"Unless you use it all the time, you're going to have to charge more for it," Anderson said.
Customer satisfaction
In recent years as local nonprofit hospitals have expanded, their new wings look less like old-fashioned hospitals and more like high-end hotels. That may rankle critics, but experts say that hospitals — even nonprofits — are competing for customers.
"From an economic point of view, they're doing exactly what they should be doing," said Anderson at Johns Hopkins. "The flat-screen TVs and fancy buildings attract patients. And since the patient doesn't really have to pay more for the flat-screen TVs" — because the rates have been negotiated — "they are going to go to them."
And, because Medicare scores hospitals — in part — on patient satisfaction, a hospital with the latest amenities may come out ahead.
"Nobody wants to be sick and stuck in a tiny little room — and people don't like sharing rooms, either," said Florida Hospital's Morrison. "So the standards for room size have changed over the years."
That conflicts, however, with the old-fashioned notion of nonprofits, Berg said.
"We're a very torn society when we think about health care," she said. "We don't like to accept that it's a business, but we fundamentally insist that it's a business model."
Linda Shrieves can be reached at [email protected]
