Issue XXX: The Nonprofit Hospital Scam

Which is worse: being openly all about the money and bragging about it or pretending to be above such things while raking in the tall dollars anyway?  Open greed or greed with dignified poise?  The rude millions or the graceful aristocratic fortune?  The answer, dear readers, lies with the uniquely American institution of obscenely profitable “nonprofit” hospitals.

If Wall Street gambles the world economy with taxpayer backing, nonprofit hospitals receive billions of federal, state, and local tax breaks in order to provide charity care that they simply do not provide.  Examples abound:

• Methodist Hospital – The most prestigious hospital in Texas was sued by Jim Mattox, the populist state attorney general, for spending peanuts on indigent care (1% of gross revenues, 6.8% of net revenues) in the 1980s.  The numbers?  $5 billion in revenue over four years, $250 million in profits, $330 million in cash, and yet only $17 million in indigent care.  They must have spent their property tax break on hotels, hunting lodges, real estate, valets, and restaurants .
• M.D. Anderson – Flip-flopping between first and second place for the best cancer center in the world, the M.D. Anderson Cancer Clinic is actually part of the University of Texas, a public university system.  Recently testifying before Congress was a woman from Lake Jackson who was told turn over $60,000 to be admitted to the hospital after she gave them a check for $45,000 for her lab tests.  And she had insurance.  As the Senate Finance chairman in Austin remarked, “M.D. Anderson is public institution that doesn’t seem to see public patients.”  M.D. Anderson responded that you can’t “compare” M.D. Anderson to local Texas public hospitals in terms of their indigent load.  They are after all, only the second richest cancer charity in America the president muttered.  Perhaps they should be compared to these out of state gems.
• Northwestern – Northwestern built a new campus with marble lobbies for, you know, one billion dollars.  One thing they forgot to pay for was indigent care which was only $20.8 million in 2006 (compared to the CEO’s salary of $16.8 million and an annual tax break of $37.5 million).  Maybe the Scrooges should dig a bit deeper into their portfolio of $1.82 billion, enough to run for an entire year without a penny of revenue.
• University of Chicago – An “elite” institution (i.e. we treat rich people and research their diseases) in the poor African-American South Side of Chicago made the papers for its ER’s callous disregard of a child whose lip was bitten off by a dog because he only had Medicaid.  The American College of Emergency Physicians rebuked the institution for its systematic non-treatment of the uninsured and called for a congressional investigation.  An even dirtier secret is that the Urban Health Initiative to keep people out of the ER was cooked up by Michelle Obama and marketed by David Axelrod, Barack Obama’s chief strategist in their days back in Chicago.  The numbers?  $1 billion in revenue, $38 million in tax breaks, and yet only $8.7 million of charity care.  Northwestern (11,000 charity outpatients and 1,000 charity inpatients) looks like the Gates Foundation compared to the University of Chicago (63 charity outpatients, 312 inpatients).
• Pittsburgh – Nonprofit institutions, including the very profitable University of Pittsburgh Medical Center, cannibalize the tax base of the city by buying up profitable businesses and restaurants that are then exempt from local taxes.  The city still has to fund fire, police, electrical, and sewer services which raises taxes for everyone else (who then move outside the city limits becauses taxes are too high).  Of course, the hospital CEO makes $2.4 million while a struggling city dies a little bit more.

With stats like these, is it any wonder that 77% of nonprofit hospitals are profitable while only 61% of for-profit hospitals make money?  Perhaps it is best to leave the last word from the bastards themselves:

Methodist Hospital of Houston disputes the charges made by the Texas Attorney General, Jim Mattox. “We are a nonprofit hospital, but not a charity hospital,” said Larry L. Mathis, the hospital’s president. “We do not set out specifically to extend our services to the poor. We were founded 71 years ago as a teaching and research center, and we believe those activities are charitable because they benefit everyone.”

Links

• Wall Street Journal – “Senators Consider Curtailing Hospitals’ Tax Breaks“

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Parasitology: Is America Capable of Real Growth?

From the savings-and-loan meltdown to the dot-com boom and bust to the housing boom and bust, Americans have been floating up or down based on the gambling of fat cats since 1980 started the era of financial deregulation.

One of my favorite writers, Matt Taibbi, has written about how investment banks (especially Goldman Sachs) have been ripping off Americans since the Great Depression in his article “The Great American Bubble Machine.”  They profit by peddling shit (IPOs, houses, crap mortgages), and then short-sell the American Dream.  Then they buy off members of both parties (especially Democrats).  The yuppie Democrats of the Clinton years have all prospered handsomely like Lawrence Summers, Robert Rubin, and Rahm Emmanuel.  Even Tim Geithner, who didn’t work in the private sector, is deeply conflicted given who he worked with at the New York Federal Reserve.

The article has attracted criticism, but people accuse him of conspiracy theories when what he is saying is no different from what an IMF economist has said.

This follows his excellent expose of how the London division of American International Group destroyed the world economy with collateralized debt obligations.  It starts like so:

It’s over — we’re officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

If the economy of post-Reagan America has been a sandcastle built on a foundation of debt and speculation, is it possible that America can have actual economic growth (as opposed to wild bubbles and crashes)?  We should ask Dr. Doom first.

Dispatch from California: You can’t always get what you Want

An atrocious bond rating on the edge of sinking further.  A finance department issuing IOUs instead of checks.  Double-digit unemployment.  State employees sent home because there is no money to pay them.  Schools and a majority of parks shut down.  An insulated middle class, upper class, and elite oblivious to the neediest who will suffer the most.  No solution is forthcoming and the leadership cannot and will not fix it.

Ungovernable, unfixable, and utterly broke.

Zimbabwe?  Bihar?  Burma?  No, I’m talking about the biggest state in the nation and the eighth-largest economy, the once-great state of California.  Once a prosperous middle-class land ruled by enlightened moderate politicians like Republican Governor Earl Warren, the state had the best public school system and university system in the country (and world).  After decades of decline it is now the dichotomous land of ‘hood or Hollywood while the middle class has been packing up and moving to the Mountain West and Texas for years.

It takes a lot of work to piss away a good thing, and Californians did themselves in with right-wing populist tax gimmicks and a Progressive Era constitution highjacked by special interests and bad ideas.  The worst idea combined both of these : the Golden State electorate voted for Proposition 13 which froze property tax increases at a small annual rate until resale of the property.  This decimated the once-generous tax base and leads to ludicrous situations where Warren Buffet pays more property taxes in Omaha than in Laguna Beach.  Ridiculous rules also required that budgets and taxes be made with two-third majorities.  Even the 2003 political meltdown and circus that lead to the populist recall election of Arnold Schwarzneggar failed make a dent in the long-term problems the state faced with each election bringing a new set of pols ready to kick decision time further down the road (Texas pols, please take note).

California, the original red state, houses the right-wing paradise of Orange County which gave us Richard Nixon and Ronald Reagan.  The modern conservative movement was born in Southern California and hated “pinkos” like Earl Warren.  They had Eisenhower “kick [him] upstairs” to the Supreme Court so they could take over the Republican Party with true believers like their hero Barry Goldwater (R-AZ).  Goldwater was famously trounced in the 1964 Lyndon Johnson landslide, but his supporters went on to deliver his fondest disciple, Ronald Reagan, to the governor’s mansion.  Reagan was not as anti-government and hawkish as the conservative nostalgists will have us believe, but his 1980 presidential election brought the rapid decline and death of the moderate and liberal Republicans to the point that Sarah Palin is now the frontrunning candidate for the GOP primary.

Californians, like Americans in general, want it all.  Good schools, parks, environment, and social services and low taxes.  California has given to America as it has taken from us: summer blockbusters and the Godfather, free speech movements and Richard Nixon, peace movements and the nuclear bomb, middle class prosperity and housing bubbles.  Pending a constitutional revolution, the Golden State has clearly lost its shine for a long time to come.

Sorry dudes, you can’t always get what you want.

Atlantic Monthly – “California Dreamers”
Salon.com – “Californians are sinking themselves”
The Economist – “California: The ungovernable state”
Salon.com – “Are Californians overtaxed?“