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You Write, I Listen

Philip Betbeze, for HealthLeaders Media, January 9, 2009

Many nonprofit hospital/health systems report their "profits" in the media and talk about their "profitability." Ascension Health, the largest Catholic nonprofit, recently reported that it delivers charitable care valued at just over 2% of revenue. Fortune 500 corporations have records of giving that rival that. Of course, 2% is better than nothing, and this doesn't make them bad people. It does, however, further expose the nonprofit masquerade. Many hospital organizations operate the same as for-profit companies and should logically be converted to for-profit corporations. But it is a separate issue over whether these healthcare "corporations" should be subject to federal and state income taxes. A significant percentage of hospital revenue (indeed healthcare revenue) comes from state and federal government, which now accounts for more than $1 trillion in annual payments into the healthcare system.

It makes marginal sense for any hospital or healthcare provider to be subject to income taxes on profits derived from revenues received from government. The real issue Congress should be addressing is whether any healthcare player, profit or nonprofit, should be subject to income taxes at all. We have runaway healthcare costs with government the largest single payer and seeking to play a greater role by establishing universal healthcare. Wouldn't it make more sense to suspend income taxation on all healthcare facilities, possibly physician practices, and yes, even health insurers; for-profit or nonprofit? We know that taxation throughout the healthcare industry is as flawed as its financial incentives. Employers get deductions, but individuals do not; one hospital in town pays, the other does not; and on it goes.

Congress can relieve a degree of financial pressure in the industry just by changing how healthcare is taxed, which is within its power; rather than trying to distinguish whether a healthcare organization is operating for profit or not. The constant trading of dollars back and forth among healthcare providers, health insurers, and government is a waste of time and resources and does not give us the most healthcare for the dollar. I'll leave the issues of local property real estate taxes, charitable contributions, and equity value for another day. We should not have to have discussions over which organization provides the greater community benefit—and healthcare is different from Wal-Mart. The federal government isn't Wal-Mart's biggest customer.

Robert L. Trinka, Chairman & CEO PhyhealthFinally, here is a quick hit in support of my column Good Thing Hospitals are Closing. And by the way, I'll run a rebuttal column from a hospital CFO in my "Finance Forum," section in an upcoming issue, just in case you thought I was cherry-picking the responses that agreed with me.

 

Phil,

Excellent article and very refreshing to read the truth—if businesses can't make it, then they should be allowed to fail and fade away. New healthier businesses (healthcare delivery systems) will emerge from the ashes and we will be better off for it.

Patrick D. Barron, President and CEO Emergency Medical Care, LLC


Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.
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