For too long, hospitals have operated with near total impunity due to their extensive and dedicated lobbying efforts. This month, however, hospitals are facing more scrutiny than ever before.
In a just-published report by the Center for Medicine in the Public Interest (CMPI), the authors present a well-documented, data-centric case that hospitals are the primary drivers of the astronomical rise in medical costs and the resulting “crisis of affordability and accountability” in the American healthcare system. And, as Dr. Oz recently pointed out on a call with lawmakers, non-profit hospitals are some of the worst offenders.
The non-profit status that most American hospitals enjoy affords them protection from Congressional scrutiny, but their astronomical prices are outpacing inflation. Hospital expenditures account for the single largest share – at $1.5 trillion – of the nearly $5 trillion that Americans spend annually on healthcare, with other expenditures like retail prescription drugs and physicians & clinics coming in at a fraction of that amount.
As American non-profit hospitals rake in cash from patients, 80% of them have achieved “fair share deficits,” meaning they gave less back to their local communities than they received in tax breaks. The total fair share deficit across all non-profit hospitals in America amounts to $25.7 billion annually, which, as the CMPI report concludes, is sufficient to “pay off the medical debt of everyone in California, Texas, New York, and Pennsylvania combined.”
This sort of profiteering by supposedly “charitable” institutions is unconscionable. It certainly qualifies as waste, fraud, and abuse of the system, and it’s made even worse by the industry in which it’s taking place: caring for sick people.
Could members of Congress have known, as the CMPI report states, that “over the last 25 years, hospital service prices have surged 250%...twice the overall rate of medical care inflation and triple the rate of general economic inflation?” Of course, they could have known, but no one was asking the right questions or scrutinizing non-profit hospitals.
The CMPI report also shows that hospital consolidation (more than1600 mergers between 2000 and 2020) has contributed to price increases and fee-for-service (FFS) models “exacerbate these issues by incentivizing quantity over quality,” because hospitals “benefit financially from more tests and treatments, irrespective of outcomes or necessity, distorting clinical priorities and bloating budgets.”
The American people may not have had this data. Still, they’ve certainly endured the experience, or as the CMPI report labels it, the “sad reality” of the modern-day hospital visit. For Americans to be so wrongfully treated, to endure overcrowding, worse service, surprise billing, and aggressive debt collection by the institutions meant to keep them healthy, all stems from one reality: a lack of accountability. Maybe lawmakers shouldn’t be shocked that, in a recent survey, more than 91% of American voters supported “requiring hospitals to publicly post their prices for common procedures,” making it possible for individual patients to shop for the most affordable care.
In case you’re wondering what “non-profit” hospitals have been spending their profits on while exploiting their tax-exempt status, delivering minimal charitable care, and avoiding fiscal scrutiny, the CMPI report provides answers: obscene executive and administrative salaries, lavish marketing expenditures, direct political donations and lobbying initiatives, and very aggressive debt-collection. In other words, America’s non-profit hospitals have been acting a lot like free-enterprise, for-profit companies are free to act in this country, but without any of the shareholder scrutiny, regulatory oversight, or media skepticism to which capitalistic enterprises are subject.
CMPI’s report is not just a shocking indictment of the American hospital system’s waste, fraud, and abuse, it also offers some simple, straightforward, and wildly popular public policy initiatives, including site-neutral payments that don’t penalize Americans for where they live; real reform of tax-exempt criteria, assigning “non-profit” status only to those who can demonstrate tangible community benefits; absolute price transparency that would require hospitals to disclose upfront, clear and understandable pricing; and, actual oversight of executive compensation, imposing stricter guidelines on salaries and bonuses.
As Peter Pitts observes, “Hospitals have remained in the shadows for too long, and the divergence between the mission of non-profit hospitals and their operations can no longer be ignored.” Whether it be through the ‘Big Beautiful Bill’ or a separate legislative effort, elected officials must address this issue with hospital-focused healthcare reform. Taxpayers deserve it, patients need it, and it’s long overdue.
Andrew Langer is the President of the Institute for Liberty and host of the Lunch Hour podcast.
