Why should hospitals get a special tax exemption when physician offices that offer more affordable care don’t?

Businesspeople grabbing money

A recent article in Medical Economics highlights the above unfair break for “nonprofit” hospitals. The author is Craig M Wax, Do, a primary care physician who is the vice president for health policy at Practicing Physicians of America and blogs on independent physician practices.

When Medicare got established in 1965, it’s aim was to provide medical insurance for the “aged” over 65, then the life expectancy. Medicaid was also established at the same time, but to provide means-tested insurance benefits for the “poor and indigent.” Medicaid from its inception until today provided reimbursement that didn’t cover the costs of care, so hospitals raised their asking list prices, called chargemaster pricing. In this way, they could recover a higher percent reimbursement from Medicare, private insurance, and self-pay patients.

Following the passage of Medicare, in 1969 the IRS removed the requirement that non-profit hospitals offer a portion of care without charge or at rates below cost. Revenue Ruling 69-545 created what has become known as the “community benefit standard.” A further competitive advantage was thus handed to hospitals, not available to independent physicians or other medical facilities.

In recent decades, as the unsustainability of Medicare has become clear, Congress, hand in hand with the HHS, has fixed Medicare prices. In addition to securing higher payment levels for hospitals relative to other sites of care, the hospital cartel raised prices on other patients to compensate further.

The disparity of the non-profit status combined with facility fees have encouraged hospital predatory acquisitions of independent physician practices. While independent practices close their doors, non-profit hospital systems are thriving.

While CEOs of non-profit hospitals average base salary was $595,781 in 2009, according to JAMA, the top earners have upped the ante since.  In 2014, CHOP CEO Steven Altschuler received total pay of $4.7 million, according to a Philadelphia Inquirer report. In the same year, PENN CEO Ralph Mueller made $2.4 million dollars in salary and benefits, according to The Daily Pennsylvanian.

These shocking stats lead to an obvious question: Why should hospitals get a special tax exemption when other healthcare entities that offer more affordable care, like physician offices and independent labs, don’t?

So, hospitals dodge taxes, overcharge patients with inflated chargemaster prices, pay executives millions, and leave the state taxpayers holding the bag. It is time for hospitals to post prices, compete on price and quality, cancel their cronyism with government, and pay their fair share of taxes.

Read the full article here.