We hear frequently about the massive tax relief awarded to “non-profit” hospitals for treating indigent patients, but little is said about physicians treating similar patients. The reason is simple: physicians receive zero tax breaks despite rendering billions in free uncompensated care every year.
Of the roughly 3,900 non-federal, short-term, acute care general hospitals in the U.S., 62 percent of them are deemed non-profit. That means, of course, that they are tax exempt. Unlike physicians, they pay no property, state or federal income taxes – not even a sales tax! Such a sizable tax break for non-profit hospitals, in exchange for their caring for elderly and indigent patients, might have seemed a fair compromise back in the 1950s – before the creation of a safety net for such patients. But that all was supposed to have changed on July 30, 1965 when President Lyndon B. Johnson signed the Medicare and Medicaid legislation into law. Yet, people still fell through the safety net and hospitals continued to provide uncompensated care. Over the years, non-profit hospitals became experts at reporting their uncompensated care.
What’s more, after the passage of the Affordable Care Act, there should not have been any need for nonprofit hospitals to continue to catalog their charity and under-compensated care –most particularly in those states that expanded Medicaid. What didn’t change, however, was the tax-exempt status of non-profit hospitals or their continued reporting of their charity care. Understandably, they didn’t want to lose their substantial tax breaks, and they needed to justify why they should be allowed to retain them. What then should the hospitals do?
Voila! Why not continue to document on their 990 tax forms all of the free care that they provide to the indigent no matter how suspect the numbers? As Doctors Marian Mass and Vicki Wooll have pointed out, along with Marni Jameson Carey, the CEO of Association of Independent Doctors (AID), non-profit hospitals base the level of free charity care on their Charge Master retail prices, not on the real cost of providing such care, or on the Medicare and Medicaid reimbursements. These are grossly inflated fees far greater than any insurer or the federal government would allow.
For example, a 2016 Florida Bar Association Journal reported that the “common diagnosis of chest pain can carry a Charge Master price of over $25,000 compared to the $3,500 that Medicare would allow” – whereby the hospital can seek a tax credit for the difference of $21,500 on merely one procedure. Not only does the hospital claim the difference as a tax benefit and use it to illustrate their largess, they also then use the difference to claim under-compensation when asking for greater reimbursement from public funds like Medicare and Medicaid.
This sinister voodoo economics principle has worked for many other non-profit hospitals, as well, which are quite profitable as physician and writer, Craig W. Wax, D.O, points out – especially when compared to private medical practices which are taxed by county, state and federal governments as for-profit entities. Doesn’t seem fair, does it? And, it isn’t!
Dr. Wax cites a regional, non-profit, multiple-hospital system which owns profitable real estate including ambulatory surgical centers, a sports medicine center and a “medical” spa. This tax-exempt non-profit had total revenues over $1 billion in 2012, and there are many similar examples.
Meanwhile, physicians face substantial obstacles in attempting to sustain their practices in an increasingly difficult practice environment. Government and insurer mandates, and a new value-based payment model, which favors large systems over smaller practices are just a few of them. Throw in an EHR and matrix mania, which most certainly were not designed for physician efficiency (and only intended to play up to medico-legal-government and insurer convenience). They all add to a difficult practice environment. According to the Physicians Foundation 2018 survey, 39 percent of physicians believe that EHR design/interoperability is the number one least satisfying thing about their medical practice. No wonder 78 percent of physicians in that same survey expressed burnout – sometime, often or always – in their practices.
To add insult to injury for all of us who pay into our healthcare system – and especially galling to physicians – whenever a non-profit hospital buys up a for-profit physician group, taxes originally paid to the community by the physicians – ARE LOST! And to further underscore the unfairness of it all, the hospitals can use some of those tax-free funds to buy up additional physician practices – and then they add an extra facility charge on top of it!
Countless physicians have contributed billions of dollars of uncompensated care over their careers and still do. One physician estimated recently that he had “written off over $8 million of free care to the uninsured” over his 26-year career – but he is “still liable” for the results of those free treatments. Where is the tax break for him or his countless other physician colleagues who give or have given free care? A number of physicians over the years have told us that they see Medicaid patients but never submit a bill. “The payment isn’t worth the paperwork, etc,” is the common refrain.
If non-profit hospitals can receive substantial tax breaks despite making huge profits, why can’t all physicians (at least those in solo or small practices) be eligible for the same? After all, they need it far more than those billion-dollar non-profit hospitals and it would help sustain many marginally sustainable practices. More physician resources mean better patient care and more face/contact time with their chosen physicians. That works for everybody!
The time has come for fairness.
