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Wisewon wants me to talk about this Wall Street Journal article showing that non-profit hospitals sure seem interested in profits. The article mentions Northwester Memorial Hospital, "which has rebuilt its entire campus in the last few years, including a new women’s hospital with marble in the lobby and flat-screen TVs in birthing rooms [and where] the hospital’s former CEO received a $16.4 million payout in 2006."Gross stuff. I'm going to outsource this bit of commentary to Maggie Mahar and her excellent book, Money-Driven Medicine:
As health care became increasingly sophisticated, neither government nor a philanthropy could keep up with the levitating costs of a high-tech industry. Meanwhile, in the early 1970s, Washington began to question what many saw as runaway hospital spending. Luckily, at about this time, the bond market decided that it would be more than happy to provide the capital that non-profits needed -- for much the same reasn that the stock market was eager to finance the first for-profit hospitals. With revenues pouring in from bth Medicare and the private-sector employers who financed commercial health insurance, hospitals seemed a sure thing...By the late 1970s, nearly 50 percent of hospital financing was done through tax-exempt bonds. Ten years later, 80 percent of construction funds for not-for-profit hospitals would come from borrowing -- up from 40 percent 20 years earlier. By 1981 philanthropy and government grants funded less than 8 percent of hospital construction.The change meant that not-for-profit hospitals had to redefine their mission. The expectations and demands of a bond investor who entrusts his savings to a hospital are, after all, quite different from the hopes and goals of a philanthropist who bids only for immortality: the bond investor expects a return on his money...This changes a hospital's priorities. In the past, when a hospital board decided how to allocate its resources, board members saw themselves as running a social service. When they looked in the mirror, they didn't see a crew of savvy entrepreneurs; they saw pillars of the community...[So] the economic reality is this: 45 years ago, the market did not set a hospital's priorities because hospitals did not rely on the market in order to survive. Today not-for-profits rely on borrowed money for more than half of their capital. And the cost of much of that money pivots on how well rating agencies like Standard & Poor's view a hospital's balance sheets.Essentially, not-forprofit hositals now act like market creatures because they're...market creatures. They might be somewhat more interested in charitable care, but the main difference between for-profit and non-profit hospitals is that taxpayers subsidize the latter.
