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Hospital bill sample for non-profit organizations

hello and welcome to a health policy i'm your host alan weil [Music] out of about 5 000 community hospitals in the united states almost 3 000 are non-profit more than a thousand are investor owned also called for-profit and the balance are owned by state or local governments now non-profit hospitals like all non-profit organizations must have a charitable mission and for hospitals that mission is generally expressed as providing charity care and various benefits to the community in exchange non-profit hospitals are exempt from various taxes they can receive tax-deductible charitable donations and they may have access to tax-exempt bonds there's a long-standing debate regarding whether non-profit hospitals deserve the benefits they receive and whether nonprofit hospitals really behave all that differently from investor-owned hospitals the similarities and differences in hospital behavior based upon ownership is the topic of today's episode of a health policy i'm speaking with jill horwitz the david sanders professor in law and medicine at the ucla school of law dr horwitz and austin nichols published a paper in the march 2022 issue of health affairs exploring the relationship between urban hospitals ownership type and which service lines they offer they found that for-profits non-profits and government-owned hospitals are all more likely to offer a service if it's profitable but for-profit hospitals are overall more responsive to service profitability than non-profits we'll discuss this finding and we'll place it in the context of broader research on the topic in today's episode dr horwitz welcome to the program thanks for having me i'm really looking forward to this conversation you've been working in this area for a while and uh we haven't seen a whole lot of change so there's been a little nibbling around the edges but just to get started we throw around these terms non-profit for-profit investor owned what benefits does each of those organizational structures confer on the organization why would you choose one over the other what do you have to do if you're a non-profit what do you have to do if you're for-profit the difference between a non-profit and a for-profit has to do with both state law and federal law the designation of a non-profit is a matter of state law and more or less what it means is that that the organization needs to be dedicated to some purpose like providing health care to people who need it if you're a for-profit your purpose is rate is making money and so that's that's the major difference between the two and whether you get benefits like income tax exemption or property tax exemption depends on whether you meet other kinds of requirements so there's a common misunderstanding people tend to conflate the benefits that you get from ownership with the status itself okay so just tease that out a little more we don't need to be total experts in hospital finance here but you're right given that common confusion just say a few more sentences so we get what what's the decision point uh you know that puts a hospital in one category the other it really has to do with the purposes that the founders embraced when they started the hospital so sometimes they're investors who want to make money and they think health care is a good investment you know for example there were a lot of for-profit groups that bought up hospitals around the time that the nc uh the aca was passed because they thought they were going to be able to make money off of it if you're a non-profit hospital you need to be making money so that you can survive so that you can offer your services but the main point of being a non-profit hospital is to provide care so i think the big decision point has to do with what your goals are so when you put it that way it just seems like would be obvious that when you look at things like prices or salaries or the kinds of things you look at in different organizations you'd expect to see big differences between ones that are oriented to making money and ones that are oriented to providing a benefit is that what we see yeah there are a bunch of factors that scholars and policy makers tend to focus on and they are they continue to be surprised that there aren't huge differences when you look at the finances of hospitals for example the revenues how much they might charge for a service they don't look so different when you think about the fact that these kinds of hospitals non-profit for-profit government hospitals all compete in the same markets and they more or less get their funding from the same places it's not a surprise that the finances don't look so different i tend to think that the that when you're looking at hospital behavior you should look at what makes a hospital hospital that's service provision and not really financing yeah so i want to turn to that and i will just say when you say they're operating in the same markets they're looking for the same patients as you note they often have the same payers they're also in the same labor markets they've got to hire nurses and doctors and you know other support staff in a market that is has other competitors that may have a different organization so i get this notion that they're operating actually under similar constraints even though their their reason for existence might be different i do want to just spend a minute on the paper we published in march because as you said people are often surprised they don't see bigger differences but in this paper you did find some differences so tell us a little bit about what you were looking for and what you found yes so we looked at every major service line that that hospitals offer so everything from cardiac surgery to psychiatric interventions uh to obstetrics and when you look at these service lines and you compare apples to apples so hospitals of the same size operating in more or less the same markets you find enormous differences and this should both surprise and concern us so it turns out that if you compare very similar hospitals by size and location for-profits are much more likely to offer very profitable services so they're much more likely to offer invasive cardiac services which are expensive for the government expensive for patients and tend to be over provided if you look at the non-profit hospitals they're much more likely to offer services that relatively poorly insured uninsured people are more likely to need like like psychiatric services you do see some differences even though maybe the differences aren't quite as profound as uh as as some people might expect i know this wasn't the focus of your study but there is this one little element that i want to draw out which is the changing nature of emergency services as a profitable or unprofitable line so in your study you sort of categorize different service lines as either you know more profitable or less so but it says something really interesting about hospitals how you categorize emergency services can you just say a little more about that yeah so emergency services historically have been pretty unprofitable services because emergency rooms tend to attract patients who aren't very well insured who have multiple problems and so if you want to make a bunch of money you want to pick and choose your patients you don't want to take all comers in the emergency room but there have been a bunch of changes recently that have made emergency rooms a more profitable location and these were the results i'm glad you picked up on them because these were the results that were most surprising to us one would think that um whether a hospital offers an emergency service or not is is going to be a pretty blunt measure but among the hospitals that didn't previously offer them as profitability goes up for-profits were more likely to start investing in those services so even services as basic as emergency services seem to differ by ownership form the way i read this study in its context and i liked how you started by noting that there are so many similarities you know hospitals are huge complex institutions with a lot of capital investment you know well in excess of a trillion dollar sector they're slow to move because they have all this infrastructure that's that's relatively fixed but at the margin this is how i read your paper at the margin when an incentive arises that creates an opportunity for profitability or the profitability of something begins to erode that the the for-profit orientation does lead to a more rapid shift in both directions um then occurs in the absence of that profit motive is that of is that how you see it that's how i see it in one respect so if you're looking at kind of the long-term trends of responsiveness to pricing you see that that nonprofits for-profits and even government hospitals all respond to financial incentives we kind of want them to because the government sets prices in a manner that tries to give incentives to hospitals so we're kind of glad that they all respond but the for-profits are much more likely to respond to smaller fluctuations and to respond more quickly even if there's no difference in um in the medical need for services so let me give you an example in the 90s when post-acute services like skilled nursing facilities or home health care when when financing for those services changed so that they became much less profitable the the for-profit hospitals basically dumped those services and they did it virtually overnight that kind of responsiveness has to do with profit making not medical need you know eventually the the nonprofits in the government hospitals slowly got out of those businesses too but not quite overnight yeah it's a good reminder you know we often talk about how kovid has made things that were always viewed as impossible now we shake things loose like telehealth but you know the the uh the move to drg payments in hospitals dropped length of stay like a stone um very quickly so you're right i mean we certainly know that these incentives matter and they can um and and i also like your point that we want them to matter so so we've had this really nice conversation about the difference between the two structures but on the policy side there's been a lot of focus on non-profit behavior and particularly this question of whether they deserve the benefits that they get and i want to spend a little time on that topic with you but we'll do that after we take a short break [Music] health affairs pathways is a new podcast series exploring the various avenues and alleyways of the healthcare system through a variety of storytelling unique series are created by fellows at the health affairs podcast fellowship program join the fellows on their journey to unearth a new health care story on such topics as healthcare consolidation independent primary care health equity and more our second season is a seven part series from evening kolkerny and sonia lee their series titled while we wait looks into the topic of mental health boarding in the emergency department subscribe wherever you listen and we're back i'm speaking with dr jill horwitz about her paper on hospital service offerings differing between non-profit for-profit and government-owned hospitals before the break we were really talking about the differences in how these different ownership status designations affect service offerings but when we began the segment we were talking about this long-standing question about whether or not non-profit hospitals because they do dominate the scene deserve the benefits they get from various uh favorable treatments so you've been looking at this for a while and i've always seen in the public discussion which i don't follow as closely as you do this emphasis on community benefit that sort of okay you're a non-profit and there are two things you need to do you need to offer uh charity care unreimbursed care under reimbursed care to people because that's part of what it means to have a mission but you also need to return benefits to the community you have a mobile van that goes out and people's blood pressure or whatever it happens to be and um uh so so those are sort of the dimensions that we tend to think about for for uh measuring benefit and then of course and maybe you can say a little more about this the affordable care act put in to place certain new provisions with respect to community benefit is this the right way to think about whether or not a non-profit is really meeting the test of benefiting the community and measuring the degree to which it's doing that to be a non-profit means to make a commitment to having a certain kind of purpose and so i am completely on board with holding non-profit entities accountable to to their purposes and ultimately to the public because all their assets need to be devoted to their purposes to benefit the public i am troubled by the fact that for the past 20 30 years we've been trying to solve enormous systemic national problems in health care like too much spending and too little access to care and the problems of the uninsured by shifting those problems to non-profit hospitals to solve i i think they're not capable of solving those problems their mission is not to solve their those problems it's to provide high-end health care and they're um really they're ill-equipped to solve the problems that increasingly states and the federal government are shifting to them so just to give you an example there are states uh and advocates who are trying to get hospitals to address homelessness in various regions people who work in hospitals are trained to do surgery they're not trained to solve housing crises they should be partnering with organizations that do that but it's a very inefficient way to solve homelessness okay so i couldn't agree with you more that it's an inefficient way and part of the real politics is that if you're concerned about homelessness and you see your homelessness uh your budget to address homelessness being totally inadequate and you see you know four trillion dollars in health care and you think hmm that could make a difference and you see a huge non-profit hospital sector and you see salaries there for ceos that vastly exceed the salaries of people in the nonprofit housing sector you start going okay it may not be efficient but that's not my primary concern i got a problem i want to solve here so how do we i get what you're saying but like how do we do this if we uh you know what they say don't let the uh perfect be the enemy of the good is there something we can do here that you'd feel good about yeah i think there's a lot we could do here but i think that this method of kind of adding to the responsibilities of hospitals is just gonna backfire so the the um the average nonprofit hospital in america operates at a negative margin right so let that sink in the average nonprofit hospital is not the enormous fancy teaching hospital you read about in the washington post every you know every few months when they publish the same story about how much money is being made by these places and so if you require a non-profit hospital to to take on all these other problems they'll do so poorly and they'll have to make up the money somewhere you know too many years of a negative margin and you're not operating and so what do you do you start offering more profitable services so there's plenty of room for non-profit hospitals to put stents in more people and more and more stents that people don't need and so sure you might get some of the budget going to housing but at the cost of increasing you know medicare spending and so in the end it ends up being more costly for the government and just a waste and harming patients with unnecessary care so how do we solve these problems i yeah we we solve the national problem of insurance we use the power of the federal government to deal with medicare pricing we take on the hard problems of physician salaries not not a popular subject but it's something that we're going to have to do right so so i'm going to ask it this way in your mind if we could if if a non-profit hospital could simply say we are delivering excellent care and we are a hospital and our purpose is to deliver excellent care that's our social mission that is after all clearly a public good if they could simply show that they're delivering excellent care is is that enough to warrant the benefits they get from being a non-profit in your mind it really is to me so i would say you know when you compared hospitals nonprofit hospitals to other entities in the non-profit sector we use the legal definition of charity not the popular definition so think about museums they're non-profits and nobody says to get your property tax exemption or your income tax exemption you have to give away free painting viewing right same thing with the symphony so i don't quite understand why hospitals are held to a different standard i also want us to think about the alternative so suppose we had more for-profit hospitals we'll have less state control over them and the profits wouldn't be reinvested in the hospital in the provision of health care they'd go out to the shareholders and i think that's an alternative that is not an attractive alternative yeah so i was really wondering about that as we were talking it's like if you add burdens to one structure the marginal choice between structures starts shifting in the other direction and then where are we um although some might say well you just told us there aren't huge differences between the two so maybe it's not that big a deal but i suspect it is a big deal right so i want to push back about that not so big a deal sorry no so maybe not so big a deal in the percentage of revenues that's spent on free care for indigent patients but huge differences in the probability of offering services and that's ultimately what matters to patients so i i don't want to at all minimize our problem with overspending and under insurance right those are huge national problems that the government needs to grapple with and do something about but to shift the responsibility to nonprofits isn't going to solve it and to to take away the benefits of nonprofits means shifting to to for-profits where i think we'll see everything that's going on now but worse i think one other thing i want to say is one hears very frequently that nonprofits have lost their way that there was this kind of golden era of you know um's houses where uh people could get their free care and then sometime in the late you know 1900s it all got worse right that is complete fiction the the very earliest hospitals actually charged for care in a bunch of ways so you can find records of ams houses sending their patients to the first hospitals and negotiating over price the ams houses paid the hospitals to take the sick patients and the patients who couldn't afford to pay in the oldest days were not paying with insurance or cash they were paying with their bodies they were experimented on and they were literally working in those hospitals those well enough to to provide um labor we're taking care of other patients and knitting and cleaning uh so things in that respect have gotten better we don't ask our inpatients to take care of other patients or to clean the ward so that's a good reminder that there's not some perfect era that we need to return to this is not a fall that we need to recover from that that uh the nature of the hospital has changed and the nature of finance has changed and i think it's very interesting how you describe uh the risks associated with expecting more even as we have social problems that certainly we would love every institution to contribute to solving but if you load that too much on one institution they're probably unexpected consequences before we wrap up i just want to ask a very different question so i've known you for a long time you're trained as a lawyer and you have a phd in public policy not a common combination your your your faculty appointment's in a school of law um and when we began our conversation you talked about the legal structure just i'd love to get a little bit of your sense of how your approach to health services research is shaped by having a law degree whether you think it leads you to different questions or different methods or anything i'd just like to get some insight into that i'd love to ask you the same question but i don't have the phd i just have the law degree and a policy masters but i'll i'll take a turn at answering after uh at some appropriate time um i think it makes a big difference in this subject because policymakers um and and researchers tend to conflate ownership with the benefits that come with ownership and and the regulation the opportunities for regulation really differ between the benefits and the ownership so increasingly state attorneys general are regulating behavior of hospitals based on state entity status so whether you're a non-profit or not all has to do with state law whether you get the benefits have to do has to do with the federal government in terms of federal income tax exemption but also the state government in terms of property tax exemption and so i think understanding that there are at least these three different kinds of regulatory levers lets you both look at behavior in a different way and think about interventions in a different way so for example one thing we haven't talked about is the difference between state and federal benefits so i answered your question thinking about federal benefits i i don't think that the federal government should be asking more of nonprofit hospitals in terms of community benefits i think the question of state property tax exemption is a much harder one because the trade-offs are more constrained there right you have to think about the tax base and the trade-offs between uh supporting a hospital versus supporting a school system and there i think um you might want to ask a bit more of your non-profit hospitals you know recognizing the consequences of doing that but all in maybe you want to support your local schools more than you want to support your local hospital that's really interesting and i it uh it gives me a concrete sense of a fairly abstract question that i asked about your uh how your education affects the the research you do but uh it's a great example of how bringing different fields together can lead us in directions we wouldn't go if we were studying this just from an economics perspective or just from a health policy perspective well uh dr horowitz it's been great to have this conversation with you great to read your scholarship and have the privilege of publishing this last piece in march thank you so much for being my guest on health policy great thanks for having me thanks for listening if you enjoyed today's episode i hope you'll tell a friend about a health policy health policy is produced by health affairs the leading journal for health policy research the team behind the show includes patty sweet jeff byers julia vivolo sarah culk and sue ducat like the show subscribe to a health podcasy on apple podcast spotify stitcher google or wherever you listen to your favorite podcast thanks for listening and have a great morning day or evening [Music] you