Non-Profit Hospitals & CEOs make the main profits

I was sent an important piece of information by one of my senior colleagues and when I went through it, it made sense. Even in India, in the so-called trust “not for profit” hospitals, the main take away is by the top ranking two or three non-medical executives including the marketing team distributing pay offs.

Can’t doctors run hospitals? They had been running them all these years.

Why do we need marketing departments in established hospitals to entice patients? If hospitals deliver the best care, patients will come of their own. A word-of-mouth referral from your current patients is the most effective marketing tool for hospitals and doctors. Why do branded hospitals need to market themselves?

A retrospective observational study published in JAMA Internal Medicine in January 2014 had characterized the compensation of Chief Executive Officers (CEOs) at nonprofit US Hospitals and examine its association with quality metrics. The study concluded that CEO compensation at nonprofit US hospitals varies widely and CEOs of hospitals who had greater use of advanced technology and higher patient satisfaction had more compensation (pay). But no association was found between the CEO compensation and the quality of care delivered, patient outcomes, or community benefit.

The rising cost of healthcare in India is a concern.

As per a recently published research paper based on cross-sectional analysis of National Sample Survey Office (NSSO) data, 55 million Indians were pushed into poverty in a single year because of having to fund their own healthcare, and out of this, 38 million fell below the poverty line due to spending on medicines alone (Press Information Bureau, July 31, 2018)

Even in the US, families who are working hard to get ahead now pay nearly $20,000 per year in insurance premiums, deductibles and out-of-pocket costs for healthcare.

But these so-called “non-profit” hospitals and their CEOs are getting richer while the people are getting healthcare poorer.

Affordable care can become more affordable, if the cost of marketing and managing the hospitals can be passed on to the patients.

A new report “Investigating the Top 82 U.S. Non-Profit Hospitals, Quantifying Government Payments and Financial Assets” specifically looked at large non-profits organized as charities under IRS Section 501(c)3 with the mission of delivering affordable healthcare to their communities. They found that these hospitals add billions of dollars annually to their bottom line, lavishly compensate their CEOs, and spend millions of dollars, which are generated by patient fees, lobbying government to defend the status quo.

The executive compensation showed that 13 organizations paid their top earner between $5 million and $21.6 million; 61 organizations paid their top executive between $1 million and $5 million and only 8 organizations paid their top earner less than $1 million (which proves it’s possible).

Collectively, $297.5 million in cash compensation flowed to the top paid executive at each of the 82 hospitals.  They found pay outs as high as $10 million, $18 million and even $21.6 million per CEO or other top-paid employee.

Banner Health paid out $34 million to just two executives. The president of Banner made $21.6 million and an executive vice-president made $12.4 million.

Consider Former CEO at Memorial Hermann in Houston, Texas made $18.6 million. In St. Louis, Missouri, the chief at Ascension Health made $13.6 million; the CEO at the Kaiser Foundation in Oakland, California made $10.7 million; and $10.6 million went to the top paid executive of Northwestern Memorial HealthCare in Chicago, Illinois.

When summing the last four years of pay (2013-2017), each of these highly compensated executives – who made more than $10 million in 2017 alone –  earned an extraordinary amount of compensation: Ascension CEO ($59.1 million); Kaiser CEO ($29.8 million); Banner CEO ($29.6 million); Advocate Health CEO, based in Downers Grove, Illinois ($27.8 million); Memorial Hermann Special Advisor/CEO ($27.3 million); and Northwestern Memorial COO ($15.3 million).Even after paying lavish salaries, these non-profit hospitals had enough left over to add nearly $40 billion to their bottom-line.

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