Ted Alcorn, NM in Depth - Are Nonprofit Hospital Subsidies a Good Deal?

Ted Alcorn, NM in Depth
Are Nonprofit Hospital Subsidies a Good Deal?


In America today, we have three kinds of hospitals: public, those paid for and run by the federal, state or municipal government: private, hospitals privately-owned and run for profit; and hospitals that are known as non-profits, what were once known as charity hospitals, run by religious or secular service organizations, most them considered non-profits themselves.

In New Mexico, despite the prominence of University of New Mexico Hospital in Albuquerque, across the state, the number of government hospital beds is dwarfed by those at non-profit and private/for-profit hospitals: 1068 government hospital beds; 1972 beds in nonprofit hospitals like the Presbyterian system, and 2019 beds in private hospitals, among them the Lovelace chain.

These three parallel lines of medical service once served definable and different sets of customers. The private hospitals drew people with the best ability to pay, either with the best private insurance or money of their own. The nonprofits catered to religious or ethnic communities, and people insured through their unions or other corporate-sized aggregations.  The government hospitals often were major teaching and research centers producing high-end medicine, while at the same time proving the last resort for care for poor and uninsured people.

But those three parallel lines were drawn before there were Medicare and Medicaid, well before Obamacare and expanded Medicaid meant that more and more of the healthcare market was defined by prices set and paid for by the federal government. Now hospitals know that more and more healthcare customers’ bills are backed by Uncle Sam.

For the nonprofit hospitals, the new reality of near-universal medical insurance coverage presents an existential challenge.  Medicare and Medicaid effectively ended the market for “charity” hospitals.  People empowered with Medicaid and Medicare cards don’t need charity, they can get care almost anywhere.

And the more modern synonym for charity, nonprofit, has lost much of its meaning. A nonprofit hospital may not register a profit, but that doesn’t keep it from generating a lot of money.  A lot of that money gets siphoned away from what might be profit into sometimes lavish spending.  On salaries, for example, nonprofit hospitals often pay top managers, physicians and staff more than their private or public hospital competitors, And the income left over has made several nonprofits among the fastest growing healthcare systems in America.  Sometimes, an expanding nonprofit swallows a private hospital based on the competitive edge of tax breaks for the nonprofits.

That edge comes at a price.  Nonprofit hospitals are expected to earn their tax breaks by going beyond hospital service to provide benefits to their communities.  And part of the new environment for healthcare in America is closer scrutiny whether the services balance the tax benefits.

Across America, the cost-benefit ratio of tax adjustments for nonprofit hospitals and the extra community services they offer varies from state to state. Some states merely expect benefits, others demand them, and the rate of return can be almost nothing or something close to a tithe.



TED ALCORN is a researcher, journalist, and educator with expertise in gun violence prevention policies and programs. A lecturer at Columbia University’s Mailman School of Public Health and New York University, he also contributes public health reporting to the New York Times, The Lancet, and other publications. He was a founding employee of Everytown For Gun Safety, where he was the Research Director and then the Director of Innovation, and he previously served as a policy analyst in the Office of the Mayor of New York City. He earned graduate degrees as a Bill & Melinda Gates Foundation Fellow at the Johns Hopkins Bloomberg School of Public Health and their School for Advanced International Studies (SAIS), and lived in Beijing, China as a Henry Luce scholar.  He lives in New York City and was raised in New Mexico.








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