Column: Out-of-the-park profits for nonprofit hospitals
May 17, 2016
"Don't take me to the hospital. If we are in a car wreck, take me to the vet," my hostess informed me. Health care in that not-too-distant tropical paradise has a dreadful reputation.
Americans are overjoyed to be free of that problem. Faith in the quality of U.S. health care is as strong as what's shown at a Texas tent revival. People look at the industry with wide-eyed, open-mouthed awe.
So much so that health care is asking for blank checks, and getting them. Nationally, the cost is up to $25,000 per family per year. A trade publication puts local Obamacare costs among the very highest in the nation.
U.S. health care is twice as expensive as in many other rich countries, and four times more than the best-managed system. However, public health is not better here.
Done right, U.S. health care costs could be cut 50 percent without fudging quality. Each family could have an extra $12,500 in its bank account every year. That is life-altering money.
That is plenty of money for local housing, plenty to send kids to higher quality schools, plenty to get that troubled cousin into a substance abuse program, plenty to send 20 Guatemalan kids to school, plenty to build a great retirement foundation for every local family.
Dr. Frankenstein would like the U.S. health care system: nonprofit arms, for-profit legs, a variety of government organs and a befuddled bureaucratic brain all topped by a faintly flickering halo.
For negotiating, however, the system could hardly be harder on patients. The jargon, the insurance, the emergencies, the lack of upfront pricing, the subsidies and the mysterious invoicing all strap the patient to a gurney for a thorough fundosuction.
Master journalist Stephen Brill asked the CEO of a major health insurance company to explain a statement of benefits his company had mailed to Brill. The CEO confessed that it baffled even him.
Ugh. The most basic communication between buyer and seller, in the largest industry of the most advanced economy in the world, fails to do its job. Some patients suspect the defect is intentional.
They have good reason. Prices are painfully high. Hospitals have huge revenues. Valley View Hospital reported $192 million of cash in the door in 2014. In contrast, Garfield County budgeted for revenues of $101 million that year.
Valley View was sitting on a dragon's hoard of cash and securities piled $144 million high. That's enough to send every family in Garfield County a check for $6,300.
Nonprofit hospitals are aggressive businesses. Valley View reported being $22 million in the black in 2014. That is more money than 15 Major League Baseball teams listed by Forbes.
Hospitals are among the largest employers with the best paid execs in most communities.
Valley View Hospital Association had six people earning more than $650,000 annually in 2014.
They are all fine, productive, upstanding human beings, I am sure. They cannot be blamed for accepting generous paychecks any more than TV's Oprah or baseball's Zack Greinke.
Yet hospitals across the nation are spinning monster profits and lotto-sized paychecks. Among hospitals, the nonprofits are more profitable than for-profits, according to Brill. Something basic is out of whack.
At most nonprofits hospitals, charity is only a PR exercise. Donations into Valley View were less than 1/2 of 1 percent of revenue in 2014. It reported charity given out by the hospital at 3.5 percent of revenue.
This raises another intriguing feature (or bug) of nonprofits. Unlike governments, they are not owned by citizens. Unlike normal businesses, they are not owned by shareholders. Nor are they owned by their donors or beneficiaries.
Nonprofits are eerie beings … almost paranormal corporations. No one can claim possession. Like dogs in Boulder.
Nonprofit bosses have more power over their organizations than the ordinary corporate titan. He might as well dress in tights and a cape, with "Super Corp" stamped across his chest and fly through the air, smashing all obstacles in his organization's path to greater glory.
Instead, he could use his special powers to fight for truth, justice and the American way.
Here's how: Give away that cash stash. Yup. All $144 million. Give it to a research organization dedicated to finding as many ways to cut health care costs as possible, no holds barred. No politickin', just research.
Dig up little ways, big ways, look for new ways, all the ways, as many ways as possible. Shoot to cut society's health care costs in half. Without compromising quality. Fast.
Politicians will not do it. Patients do not have incentive to do it. Insurance companies and employers have too little market power to do it. Providers have too much market clout to want do it. Brill thinks that Medicare is doing it. Let us find out what will do it.
Seek the highest payback for the people from whom the money was wrested. Build the organization in the valley. Emancipate it from the hospital.
As a nonprofit, the hospital has a higher purpose than itself. It can give birth to an even greater good.
Vince Emmer is a financial adviser in Gypsum. Email your health care cost story and other comments to email@example.com.