The Hospital Robber Barrons


That there are indecent people in the world is not a matter of doubt.  The confusion appears to be in identifying the cretins.  

The American hospital provides the perfect case study.  On the face of it, hospitals are houses of virtue, providing aid to those during dark times.  The billboards dotting the landscape of cities proclaim it.  Dakota University Hospital Cares About YOU.  There is almost no limit to the money these modern day incarnations of Florence Nightingale  spend to convince wider society about their good deeds.  One wonders how many non-profit organizations casually spend  $5 million dollar for 30 second super bowl advertisements just to let citizens know they exist to help you.  One wonders how anyone would have known about Mother Teresa’s good will if not for her Calcutta PR team.

These organizations don’t just think they are charitable organizations.  They are regarded as such by the Internal Revenue Service.  Two thirds of the nation’s 5,000 hospitals declare themselves as  “non-profits”, an important designation that allows them to avoid paying property taxes, state or federal income taxes, and no sales tax. There are some very specific requirements charities fulfill to receive this largesse.  The IRS declares:

  • The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual.
  • It may not attempt to influence legislation as a substantial part of its activities

Yet somehow, the healthcare market has evolved to allow hospitals to launder vast sums of tax-free money into the pockets of hospital executives and physicians.  The compensation packages at the top run into the tens of millions of dollars, while the deans and chairs of big-ticket departments make millions of dollars a year.  What’s worse is that the river of money that flows to these institutions are a direct result of a massive amount of dollars spent over the years to rig the market by writing favorable legislation.  In 2018, the lobbying arm for the hospitals – the American Hospital Association – spent almost $24million to keep the gravy train running.  The arcane legislative items these dollars are used to influence won’t be brought up over dinner, but have a return of billions of dollars.

The most successful hospitals then go onto individually spend millions of dollars on top of this to influence local and national legislation.  

Rules surrounding lobbying has been tested over and over again by the courts historically, and while it raises an interesting constitutional question, the answer for a very long time now has been unequivocal.  In 1983 a group called Taxation without Representation (TWR) sued the US Treasury because the IRS stripped their tax deductible status because TWR participated in ‘substantial lobbying’.  The courts decision was unanimous, ruling 9-0 against TWR.  In writing for the court, Chief Justice William Rehnquist concluded

It is not irrational for Congress to decide that tax exempt charities such as TWR should not further benefit at the expense of taxpayers at large by obtaining a subsidy for lobbying.

The American hospital is the modern day robber baron, sucking up ever increasing sums of public dollars by any means necessary, yet still having the gall to attempt to collect vast sums of money from the hapless uninsured that end up in their care.

It is a disgusting enterprise that now unfortunately envelops physicians as well.  The former check on the avarices of the hospital administrator was the army of private physicians that didn’t march to their commands.  Years of legislative action lubricated by hospital lobbying, do-gooder politicians and a special class of non-practicing health policy technocrats have made the private physician a bit of a peculiarity across the land.  This isn’t a Walmart sob story of inefficient, higher priced, but charming mom and pop stores put out of business by a large corporation wielding a global supply chain to provide more, better, products for less.  At almost every step of the hyper-regulated environment health care is now practiced in, it has become increasingly harder to sustain a private practice model for the simple fact that the employed physician is paid multiples of what the private physician earns for the same work.  You could choose to do a procedure in an outpatient setting, but you would be paid significantly less if you just did the procedure in the hospital.  Most of the revenue for procedures done in the hospital, accrue to the hospital in the form of technical fees that massively dwarf the professional fee that typically goes to the physician.  A neurosurgeon working for the hospital makes her million dollar salary because the hospital gives her a cut of the total revenue brought in.  This arrangement means the employed physician is very much a party to the scam being perpetrated.  The comedic part is it is this same group of (mostly white) physicians that bray the loudest about privilege and inequality in society as they line up to get the COVID vaccine before anyone else.

They all get away with this charade in some part because legacy media provides ample cover for them.  The spotlight has been more withering of late (hence the billboards), but local media outlets seem incapable of holding their feet to the fire out of a mixture of ignorance and fear.  The occasional journalist may be a biology major but it takes a lot more than a few years of microbiology and physiology to understand the complex interplay of American healthcare, especially when the ‘experts’ are compromised policy types employed by hospitals.  Not surprisingly, much of the health policy oxygen boils down to “pharmaceutical profit bad” or some Atul Gawande adventure to a remote corner of the US to extol the terribleness of the profit motive of private interests in healthcare.  Never mind that Atul Gawande is a surgeon employed by one of the most overpriced hospitals in the country, or that hospitals and their “non-profit” motives suck up a third of every health care dollar spent. 

Imagine my surprise, then, when I came across a missive sent to me from the East Coast detailing a story of hospital greed that somehow made it to a local paper.  The latest hospital scheme comes courtesy of physician whistle blowers at Thomas Jefferson Hospital in Philadelphia. As an aside – a quick search reveals this particular system actually posted a slim $1 million operating profit in the three months that ended Sept. 30, which included $100 million in government aid. The government will shut you down mistakenly for not selling food with alcohol, and then dance about it, provide no help to small businesses, but $100 million dollars to hospitals that make billions of dollars ?  No problem.

The complaint from physicians relates to a new ‘grateful patient’ fund raising initiative tied to physician annual bonuses that was introduced to them in an email by Edmund Pribitkin, a physician who serves as the executive vice president of the Jefferson Health system.  Physicians would now have the ability to “notify the Office of Institutional Advancement (OIA) when a patient or patient’s family member expressed gratitude, or if there are other reasons they might be a potential benefactor.”  The simple and straightforward new protocol is to place a Philanthropy Communication order from the patient’s chart that would be directly transmitted to the OIA.  The number of referrals to OIA would then tie into physician’s annual bonuses.  Order a CBC, a Chest X-ray, and a Philanthropy Communication order! Remember, only one of those orders is associated with a bonus.

The level of dysfunction occupying the physician leadership in hospitals that sees no problem in turning their medical staff into used car salesmen is sad, but not surprising.  One wonders if the physicians that cooperated with this plan in the hopes they would eventually ascend the administrative ladder to become executive vice president would have ever disclosed to patients that their solicitations for hospital donations were tied to annual bonuses?  

This latest scheme is just the continuation of naked avarice that afflicts hospitals and has terminally infected a class of physicians that has lost their ethical compass.  This growing group is a stain on a storied profession.  Identifying these cretins in society today is easy, just look for the employed physician that starts rambling about “mission” or basically any physician with the title of Chief, Chair, or President.  Run away from them.  Don’t send them your dollars.  If the American Hospital Association supports legislation, oppose it and the politicians they have on a leash.  Heap on them the scorn they so richly deserve.  Level the playing field by stripping the hospitals of their non-profit status.  Making them irrelevant will make for a healthier society, and just may save the medical profession.  

Dr. Friedrich Chesterton is a holier-than-thou physician practicing somewhere in the United States.

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