CEOs earn large bucks at nonprofit hospitals. Does that profit sufferers? : Pictures

Almost half of hospitals within the U.S. are nonprofits, which implies they don’t pay native, state or federal taxes. In return, the hospitals present medical care, a social profit, to their communities.

They’re additionally anticipated to supply some charity care to sufferers who can not pay, and ship companies that promote neighborhood well being, corresponding to vaccine clinics or most cancers screenings.

However regardless of their community-focused missions, the CEOs answerable for these nonprofits command giant paychecks, that now high $1 million, on common. And their salaries hold rising.

Compensation for CEOs of nonprofit hospitals and medical techniques grew by 30% between 2012 and 2019, in response to a brand new research from Rice College’s Baker Institute for Public Coverage.

Which means the typical paycheck for a high govt went from slightly below $1 million to $1.3 million, in response to Vivian Ho, a well being economist at Rice College.

The beneficiant pay for well being CEOs isn’t essentially an issue, Ho says, if nonprofit well being techniques constantly ship on their mission, which is to supply high quality, inexpensive care.

However Ho worries these large salaries could also be incentivizing CEOs to make choices that don’t profit sufferers, citing a research she revealed final yr exhibiting that bigger hospital revenue margins do not lead to extra charity care.

The researchers analyzed federal tax paperwork and information and located that salaries elevated throughout the board.

Nonetheless, the CEOs with the largest paychecks labored at hospital techniques with the most important monetary returns.

The query is whether or not the nonprofit medical techniques attaining these rosy revenue margins are doing so on the expense of their missions, subverting the supposed function of their tax-exempt standing.

One research discovered that lower than half of nonprofit hospitals notify sufferers that they qualify for monetary help earlier than trying to gather on an impressive fee.

Relating to unpaid medical payments, among the most prestigious nonprofit hospitals within the U.S. garnish affected person wages, whereas others reduce individuals off from non-emergency care.

On the identical time, People are much less wholesome than the residents of different high-income international locations.

Hospital board members typically do not work in well being care

Ho theorizes that a part of the rationale that ballooning CEO pay doesn’t translate to extra inexpensive well being care is as a result of govt compensation is set by the hospital’s board members.

Lots of these board members work in for-profit sectors, that means their skilled experiences and views are sometimes divorced from the supposed mission of nonprofit drugs.

Greater than half of the board members of 15 top-ranked hospitals surveyed work in finance or enterprise, in response to a 2023 research. It additionally discovered simply 15% of hospital board members had medical coaching or labored within the well being companies sector.

“[Board members] aren’t evil,” Ho informed NPR. “However I do not suppose the incentives are arrange accurately for them to consider the well-being of the whole neighborhood and affordability.”

When reached for remark, the American Hospital Affiliation accused the Rice research of cherry-picking metrics and pointed to analysis exhibiting that affected person security has elevated in previous a long time.

“The research additionally falls quick by failing to place hospital CEOs within the context of govt expertise, by, for instance, not evaluating hospital CEOs to these at comparably sized organizations in different fields who’re the expertise that hospitals are competing for,” mentioned Rick Pollack, the affiliation’s president in an e-mail assertion.

Nonprofit hospitals and the competitors for managerial expertise

Government salaries are growing throughout all sectors, and which means nonprofits are pressured to supply larger salaries to draw the very best expertise, mentioned Lisa Bielamowicz, MD, a co-founder of the consulting agency Gist Healthcare.

“[Health care is] this very complicated product with a number of know-how,” mentioned Bielamowicz. “It’s totally, very staff- and labor-intensive. And the truth that a nonprofit is popping a revenue … permits them to reinvest over time, construct a cushion for tough instances.”

Whereas Bielamowicz agrees with Ho that extra transparency is required on how hospital boards set priorities, she explains that even nonprofit well being techniques should generate a “constructive working margin.”

A constructive working margin is what permits nonprofits to maintain up with inflation, retain the very best medical expertise, and stability treating insured sufferers with those that are underinsured or uninsured. If a nonprofit hospital loses cash or solely breaks even yr after yr, they received’t survive.

With out constructive working margins, well being techniques might need to shut a rural hospital or cease investing in wanted companies, corresponding to dependancy remedy or diabetes care. As hospital managers put it: “no margin, no mission.”

So monetary well being is essential, whether or not a hospital is for-profit, or a nonprofit, mentioned Bielamowicz.

It is smart, she added, that CEOs get rewarded once they ship on their organizations’ monetary targets.

What is the boundary between nonprofit and for-profit well being care?

Finally, how a lot a nonprofit hospital CEO must be paid is a philosophical query, mentioned Ge Bai, a professor of well being coverage and administration at Johns Hopkins Bloomberg Faculty of Public Well being.

For Bai, the wage research gives extra proof that the boundaries between nonprofit and for-profit well being techniques within the U.S. has change into too blurry, with the nonprofits working an excessive amount of like for-profits.

Tax breaks afforded to those nonprofits have allowed them to change into hyper-competitive, Bai mentioned, and this has led to a wave of mergers and acquisitions within the well being care sector. Again in 2005, 53% of neighborhood hospitals belonged to a bigger well being system, in response to information analyzed by KFF. That jumped to 68% in 2022.

Until policymakers intervene, the consolidation will proceed, Bai predicts, driving down competitors and leaving sufferers with fewer selections and better costs.

Bai, for her half, would love elected officers to do extra to power nonprofit well being care to ship on its promise to taxpayers and their native communities. Via inaction, authorities regulators have allowed the system to change into dysfunctional and profit-driven, she defined. It’s elected officers who’ve the facility to make sure these nonprofits really present a societal profit and don’t exploit their tax-exempt standing.

It’s why the pattern towards larger salaries is regarding, Ho argues, as a result of beneficiant compensation rewards nonprofit CEOs for sustaining the established order.

This story comes from NPR’s well being reporting partnership with KFF Well being Information.