Healthcare: We Get What We Pay For

Kim BellardPolitico (Dan Diamond) had two great pieces last week -- one on how tax-exempt hospitals benefited from the Affordable Care Act (ACA) while cutting charity care, and the second on how the Cleveland Clinic has built an island of prosperity amidst an impoverished community.  

I'd like to say I'm surprised, but I'm not.  I wrote about the supposed community benefits of "non-profit" hospitals two years ago, and Politico's analysis suggests things are getting worse.

They looked at the top seven hospitals, as ranked by U.S. News & World Report, and found:

The top seven hospitals’ combined revenue went up by $4.5 billion per year after the ACA’s coverage expansions kicked in, a 15 percent jump in two years. Meanwhile, their charity care — already less than 2 percent of revenue — fell by almost $150 million per year, a 35 percent plunge over the same period.

So, surprised, no.  Outraged, appalled -- yes.

My favorite trick is how hospitals claim the gaps between those outlandish charges and Medicare/Medicaid reimbursements as a community benefit.  They can also claim community outreach programs or screenings, local investments, even staff education.

Neither hospitals or the IRS are even doing a good job complying with the ACA reporting requirements, according to Politico, yet: "Not a single hospital has lost its tax-exemption because of the new measures in the ACA."

These are hospitals enjoying federal state, and local tax preferences.  They often don't pay property taxes, for example, despite often being huge property owners.  They get tax-preferred borrowing AND tax-deductible donations from you and me to build/buy even more.

Meanwhile, they are part of what critics call a "crushing lack of competition," with half of our country's hospital markets considered "highly concentrated."

Politico cited a 2016 study that found 7 of the top 10 most profitable hospitals in the U.S. were technically not-for-profit.  The lead author of that study noted, "The taxing system may not be working properly if nonprofit hospitals are making a lot of profit and not necessarily putting it back into the community."

The hospitals dispute all this, of course.  AHA didn't waste any time, shooting back the next day.  Ron Pollack, AHA's President and CEO, claims that Politico "takes a narrow view of community benefits and fails to account for the full array of programs and services hospitals provide to their communities," and that "One out of every four hospitals in America operates in the red."

Hospitals, Mr. Pollack asserts, are "finding new ways to help improve the health of their communities" and are "also working tirelessly to address and combat the social determinants of health." Maybe he should read the second piece, on the Cleveland Clinic's uneasy coexistence with its neighborhood. By almost every account, the Cleveland Clinic is a smashing success.  It is an $8b empire, is consistently lauded in "best of" rankings, makes plenty of money (over $500 million last year), draws (wealthy) patients from overseas, has a sprawling (165 acres!) main campus, and is Cleveland's largest and Ohio's second largest employer.

In a Rust Belt city, the Cleveland Clinic is a shining example of how health care can drive a local economy.  But, the neighborhood around it?  "That community is poor, unhealthy and — in the words of one national neighborhood-ranking website — 'barely livable.'"  Their own community assessment ranks the two surrounding neighborhoods as the "highest need."

CEO Toby Cosgrove told Politico: "We have three obligations.  We need to provide great health care, we need to provide great jobs and we need to support education. And we have done all those three things."  Yes, except that  the benefits of the Clinic's vaunted expertise are not accruing to the local population, at least not as by measured by, say, diabetes incidence or mortality rates, those jobs aren't going to them either, and their education suffers by the Clinic not paying local property taxes.  

Dr. Cosgrove acknowledged issues with the local community and the need for more population health, but he threw up his hands at the problem: 

We don’t get paid for this, we’re not trained to do this, and people are increasingly looking to us to deal with these sorts of situations.  I say that society as a whole has to look at these circumstances and they can’t depend on just us."

Yes, but you're in charge of the entity receiving huge tax breaks in return for doing exactly those things. 

It's not just the Cleveland Clinic, of course.  UPMC, Johns Hopkins, or numerous other non-profit giants are doing well but not necessarily improving the lives of their surrounding communities (and, of course, most such hospitals are busily expanding to more affluent suburban communities).

Still, it's unfair to blame non-profit hospitals for seeking profits rather than community health, just like it's not fair to blame physicians for opting for orthopedic surgery instead of primary care or pharmaceutical companies for investing in expensive new treatments instead of preventive remedies.  

They're just doing what Jerry Maguire taught us: "show me the money."

We spend our $3 trillion on big hospitals, highly compensated health care executives and physicians, 16 million health care jobs, thousands of health care facilities, ridiculous numbers of prescriptions, and high-tech medical devices, then we have the nerve to wonder why our health outcomes are so poor.  We don't live as long as we should, we have alarmingly high rates of chronic diseases, and we have a sneaking suspicion that many of the medical services we get are unnecessary.  

Meanwhile, 43 million of us live in poverty, some 42 million of us struggle with hunger, 30 million of our homes have serious health and safety problems, close to 2 million of us use homeless shelters or live on the streets, and less than 3% of us live a healthy lifestyle.

We act mystified about how much more we spend on health care than other countries, but that may just be because of what we count.  We spend our money on medical care, rather than on social determinants of health (SDOH), on which many other countries spend more.  

Our problem is not so much a problem of technology, or innovation, or even how we pay but rather what we've chosen to pay for.  As long as we keep focusing on (and paying for) medical care rather than on health more broadly defined, we're just going to keep getting more of the same.