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November 12, 2018

2/25/2013 12:24:00 AM
Hospitals: Why Are Nonprofits So Profitable?
Under Internal Revenue Service rules, nonprofit hospitals are not prohibited from taking in more money than they spend. However they aren't allowed to distribute profits to shareholders (because they don't have shareholders?).

So, what do nonprofit hospitals do with all their profits? They invest in new facilities, buy more equipment, consolidate physicians, offer additional services and pay "healthy" executive salaries. They expand the search for more patients, raise prices, and push harder to collect bill payments. In health care there is no price transparency and very little competition in any given locale. As a result, a hospital is often the largest local employer in a smaller community, so there's rarely any discussion about the impact of its rapid growth.

I don't know what the implications of these activities are for nonprofit hospitals that choose not to operate under Internal Revenue Service rules. But a lengthy report by Steven Brill recently published in Time magazine reveals a glimpse inside the secret world of the U.S. healthcare system with some surprising revelations about nonprofit hospitals, Medicare and Obamacare.

You can view a PDF version of the report at the following link:

Bitter Pill: Why Medical Bills Are Killing Us





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