There are greater than 4,600 hospitals within the U.S., and 49% of them are nonprofit and subsequently tax-exempt. The CEOs of those nonprofit well being methods now earn, on common, $1.3 million a yr.
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Almost half of hospitals within the U.S. are nonprofits, which implies they don’t pay native, state or federal taxes. In return, the hospitals present medical care, a social profit, to their communities.
They’re additionally anticipated to offer some charity care to sufferers who can’t pay, and ship companies that promote neighborhood well being, reminiscent of vaccine clinics or most cancers screenings.
However regardless of their community-focused missions, the CEOs accountable for these nonprofits command giant paychecks, that now high $1 million, on common. And their salaries hold rising.
Compensation for CEOs of nonprofit hospitals and medical methods grew by 30% between 2012 and 2019, in accordance with a brand new examine from Rice College’s Baker Institute for Public Coverage.
Meaning the common paycheck for a high government went from just below $1 million to $1.3 million, in accordance with Vivian Ho, a well being economist at Rice College.
The beneficiant pay for well being CEOs isn’t essentially an issue, Ho says, if nonprofit well being methods persistently ship on their mission, which is to offer high quality, reasonably priced care.
However Ho worries these large salaries could also be incentivizing CEOs to make choices that don’t profit sufferers, citing a examine she revealed final yr displaying that bigger hospital revenue margins do not end in extra charity care.
The researchers analyzed federal tax paperwork and information and located that salaries elevated throughout the board.
Nevertheless, the CEOs with the most important paychecks labored at hospital methods with the most important monetary returns.
The query is whether or not the nonprofit medical methods attaining these rosy revenue margins are doing so on the expense of their missions, subverting the supposed goal of their tax-exempt standing.
One examine discovered that lower than half of nonprofit hospitals notify sufferers that they qualify for monetary help earlier than making an attempt to gather on an impressive cost.
Relating to unpaid medical payments, a number of the most prestigious nonprofit hospitals within the U.S. garnish affected person wages, whereas others minimize folks off from non-emergency care.
On the identical time, People are much less wholesome than the residents of different high-income international locations.
Hospital board members typically do not work in well being care
Ho theorizes that a part of the rationale that ballooning CEO pay doesn’t translate to extra reasonably priced well being care is as a result of government compensation is determined by the hospital’s board members.
Lots of these board members work in for-profit sectors, which means their skilled experiences and views are sometimes divorced from the supposed mission of nonprofit medication.
Greater than half of the board members of 15 top-ranked hospitals surveyed work in finance or enterprise, in accordance with a 2023 examine. It additionally discovered simply 15% of hospital board members had medical coaching or labored within the well being companies sector.
“[Board members] usually are not evil,” Ho informed NPR. “However I do not assume the incentives are arrange appropriately for them to consider the well-being of all the neighborhood and affordability.”
When reached for remark, the American Hospital Affiliation accused the Rice examine of cherry-picking metrics and pointed to analysis displaying that affected person security has elevated in previous many years.
“The examine additionally falls quick by failing to place hospital CEOs within the context of government expertise, by, for instance, not evaluating hospital CEOs to these at comparably sized organizations in different fields who’re the expertise that hospitals are competing for,” stated Rick Pollack, the affiliation’s president in an e mail assertion.
Nonprofit hospitals and the competitors for managerial expertise
Govt salaries are rising throughout all sectors, and meaning nonprofits are pressured to supply greater salaries to draw the most effective expertise, stated Lisa Bielamowicz, MD, a co-founder of the consulting agency Gist Healthcare.
“[Health care is] this very complicated product with a number of know-how,” stated Bielamowicz. “It’s totally, very staff- and labor-intensive. And the truth that a nonprofit is popping a revenue … permits them to reinvest over time, construct a cushion for tough instances.”
Whereas Bielamowicz agrees with Ho that extra transparency is required on how hospital boards set priorities, she explains that even nonprofit well being methods should generate a “constructive working margin.”
A constructive working margin is what permits nonprofits to maintain up with inflation, retain the most effective medical expertise, and steadiness treating insured sufferers with those that are underinsured or uninsured. If a nonprofit hospital loses cash or solely breaks even yr after yr, they gained’t survive.
With out constructive working margins, well being methods might need to shut a rural hospital or cease investing in wanted companies, reminiscent of dependancy therapy or diabetes care. As hospital managers put it: “no margin, no mission.”
So monetary well being is essential, whether or not a hospital is for-profit, or a nonprofit, stated Bielamowicz.
It is smart, she added, that CEOs get rewarded once they ship on their organizations’ monetary objectives.
What is the boundary between nonprofit and for-profit well being care?
In the end, how a lot a nonprofit hospital CEO ought to be paid is a philosophical query, stated Ge Bai, a professor of well being coverage and administration at Johns Hopkins Bloomberg Faculty of Public Well being.
For Bai, the wage examine gives extra proof that the boundaries between nonprofit and for-profit well being methods within the U.S. has develop into too blurry, with the nonprofits working an excessive amount of like for-profits.
Tax breaks afforded to those nonprofits have allowed them to develop into hyper-competitive, Bai stated, and this has led to a wave of mergers and acquisitions within the well being care sector. Again in 2005, 53% of neighborhood hospitals belonged to a bigger well being system, in accordance with information analyzed by KFF. That jumped to 68% in 2022.
Until policymakers intervene, the consolidation will proceed, Bai predicts, driving down competitors and leaving sufferers with fewer decisions and better costs.
Bai, for her half, would really like elected officers to do extra to pressure nonprofit well being care to ship on its promise to taxpayers and their native communities. By inaction, authorities regulators have allowed the system to develop into dysfunctional and profit-driven, she defined. It’s elected officers who’ve the ability to make sure these nonprofits really present a societal profit and don’t exploit their tax-exempt standing.
It’s why the pattern towards greater salaries is regarding, Ho argues, as a result of beneficiant compensation rewards nonprofit CEOs for sustaining the established order.
This story comes from NPR’s well being reporting partnership with KFF Well being Information.
