Nonprofit hospitals: The potential for conflict of interest is huge

When I hear the term “charity hospital,” my thoughts turn to the grand bastions of 20th century public hospitals — Bellevue Hospital in New York City, Cook County Hospital in Chicago, and San Francisco General Hospital.

These hospitals were generally affiliated with medical schools and relied on government appropriations, rather than fees, to provide care for the poor.

Decades of legislation have brought about sweeping changes in hospital financing, accounting, and social responsibility, and ushered in a new form of charity care — the nonprofit hospital — for which there is no clear, universal definition.

Starting last summer, I began to follow reports about a nonprofit system that appears to be pushing the envelope; specifically, Ascension Health, an organization that has evolved from humble beginnings to become the third largest health care system in the U.S.

This Catholic, not-for-profit health system, based in St. Louis, Mo., owes its unprecedented growth to purchasing nonprofit hospitals and other health care facilities, and to creating a large, venture-backed fund for making strategic investments in the for-profit sector.

In his article for the St. Louis Post-Dispatch, Jim Boyle reported that Ascension’s holdings now include 220 tax-exempt subsidiaries and that its for-profit subsidiary (Ascension Ventures, LLC) has invested $550 million in startup companies that produce medical devices and provide technology services.

Today, every hospital and health system is under enormous financial pressure as the health care system shifts from paying for volume to paying for value but, although policymakers encourage innovation, this health system raises serious legal and ethical questions.

Does the for-profit structure in any way affect the amount of charity (i.e., free) care provided?

Should an organization that has transformed into a major big business enterprise be entitled to the tax-exempt status of a nonprofit?

The potential for conflict of interest is huge.

The 2014 opening of the first phase of Ascension’s $2 billion for-profit hospital complex in the Cayman Islands (an offshore tax haven and tourist destination) should certainly raise the eyebrows of the Internal Revenue Service and signal policymakers that it is time for clarity and consistency in the definitions of and legislation involving charity care in the U.S.

David B. Nash is founding dean, Jefferson School of Population Health, Thomas Jefferson University, Philadelphia, PA, and blogs at Nash on Health Policy and Focus on Health Policy.

View 3 Comments >

Most Popular

Join 137,000+ subscribers

Get the best of KevinMD in your inbox

Sign me up! It's free. 
✓ Join 137,000+ subscribers 
✓ Get KevinMD's 5 most popular stories
Subscribe. It's free.