The charitable health care racket -- Trump should slap new regulations on nonprofit hospitals

In the oath most medical school graduates take, there is a line they say: “I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person's family and economic stability.” If only executives at health care and pharmaceutical companies, insurance companies, and hospitals took a similar oath.

In all the talk of repealing failed ObamaCare and replacing it with a well-functioning, fiscally responsible and consumer-friendly set of policies, health insurance providers have taken a beating.  Drug manufacturers haven’t gotten off easy, and neither have doctors. 

But one area of the health care industry that hasn’t been examined hard enough is where the bulk of health care takes place: hospitals, especially nonprofit hospitals.

Just as technology is driving changes in the economies of health care, so are the types of hospitals that provide that health care.  First, what is it we’re talking about:  nonprofit hospitals are designated as such by the IRS for complying with not for profit guidelines, such as who owns the hospital (a religious order, a charitable organization, or a state-run university), how much “free care” they provide to indigent patients, and other benefits the hospital shares with the community. They don’t pay federal income or state and local property taxes.   

As Politico recently noted, the nation’s top seven U.S. hospitals collected more than $33.9 billion in revenue in 2015. But their spending on free treatment for low-income patients shrank from $414 million in 2013 to $272 million in 2015.

While for-profit hospitals tend to get dinged by the public for being bottom-line-driven or owned by big, faceless corporations or investor groups, nonprofit hospitals aren’t simply owned by an order of nuns in the poorest part of town.  Ascension, the largest nonprofit hospital network in America runs more than 140 hospitals, 30 senior care facilities and overall claims to have more than 1200 health care facilities in 22 states.  In 2016 the nonprofit Ascension made almost a half-billion in profits. Such hospitals are able to make that kind of money, not only from patients who pay, but also from for-profit ventures with for-profit partners, research programs, wellness programs, even their dining facilities. 

But Ascension pales in comparison to other nonprofits. We're not talking hundreds of millions of revenue, but billions upon billions in patient revenue.  Chicago's Northwestern Hospital pocketed almost $4 billion in patient revenue in 2015, and the "business" sitting on the most cash reserves in Oregon? Not Nike, a global shoe and athletic outfitter, but Provident Health and Services, sitting on nearly $6 billion in cash.

How does this happen?  Price inflation for those patients paying for their health care, whether through private insurance or other medical coverage, with the rationale being that those fees help those who need charitable care. But it’s just not working out that way, and even ObamaCare, which was supposed to help lower costs and increase access to care, didn’t help.  As Politico recently noted, the nation’s top seven U.S. hospitals collected more than $33.9 billion in revenue in 2015. But their spending on free treatment for low-income patients shrank from $414 million in 2013 to $272 million in 2015.

Take in all those numbers and consider that about two-thirds of the hospital systems in America that are enjoying record revenues operate as tax exempt, nonprofit health care providers.  When such a significant part of the health industry is acting as a charity, we as taxpayers and consumers are simply begging for health care price inflation. 

An investigation by Sen. Chuck Grassley, R-Iowa, and the investigative arm of the U.S. Congress found that not for profit hospitals went out of their way to raise the cost of health care using their charitable works as the rationale, while also not fully disclosing either their actual costs or their profits. 

Yet, shockingly, in all the debate about reforming health care, no one really wants to talk about the real problem: costs, and their main driver, health care facilities.  Call the almost non-existent conversation about all of this Example A of the power of the special interests; that and the campaign re-election donations hitting elected officials’ campaign accounts.

President Donald Trump made a bold and strong move with his executive orders last week that enabled consumers to buy insurance coverage across state lines and end of payments to insurance companies under the Affordable Care Act, which in polite company were called subsidies, but in the real world are known as illegal bribes paid for by the long suffering American taxpayer to insurance companies already enjoying massive profits.  Now, he needs to address nonprofit health care providers, and just like he did last week, he doesn’t need the do-nothing-Congress to actually do it.

The president should instruct Treasury Secretary Steve Mnuchin to change the charity regulations to require tax-exempt hospitals to post their prices for care.  Further, the regulation changes should require that anything over $20 million in revenue will not be treated as tax exempt unless the providers post prices, have complete cost transparency, and can have real evidence that at least ten percent of their care is charitable. If they will not post prices, they will have their tax-exempt status withdrawn. It’s that simple.

By bringing pricing transparency, Trump can unleash some of the best negotiators in the world: American businesses. As one of the largest consumers of health care products, American businesses can gain the ability to negotiate and drive down both the underlying costs as well as insurance premiums with pricing transparency. As strange as it might sound on first blush, Trump can use for profit companies to bring reform to health care in America. Ultimately, pricing transparency is the only way to get to consumer-centered policy.  If Trump were to enforce that transparency, it would revolutionize health care in America and make the industry patient- and doctor-centric once again.

Ned Ryun is the Founder and CEO of American Majority, a national grassroots organization. Learn more at AmericanMajority.org.