An April 4 article in the Wall Street Journal, entitled "Nonprofit Hospitals, Once For the Poor, Strike It Rich" has prompted a slew of comments on wsj.com. I think they are worth reading and do not intend to summarize them here. Some accused the Journal and the quoted politicians of grandstanding. Others said the story was right on target.
The issue of the type and degree of benefits provided by non-profit hospitals is a legitimate and important one. Our institutions are given certain privileges by the government, and the government has a right to supervise our performance in carrying out our public service functions. Recently, the Massachusetts Attorney General announced a review of certain of these activities, those relating to community benefits. This is a healthy step, in that as times change, the standards of behavior and reporting should likely change, too.
The WSJ's story contained examples of non-profit behavior that many will find excessive. I think some examples chosen are unusual and not reflective of most hospitals. But I imagine that a detailed review of Massachusetts hospitals would find some items of a more modest level that at least some people would find troubling.
On this blog, I have written posts on several of the commercial aspects of running a hospital -- for example, one on the growth imperative, another on advertising. I have also told about what it was like when this hospital was very close to closure because of a failure to mind its financial ways. Finally, you have seen posts on the special role of our Board of Directors in setting standards for a non-profit institution like ours.
In reviewing this issue, it seems to me that there is not always a bright line between the business behavior of a non-profit and a for-profit company. Both need to operate in the black to carry out their purpose. Both need to determine how to compete in a marketplace to achieve that. The strategies employed to do that might look quite similar. Both need to attract qualified people in both supervisory and line positions. The salaries and benefits offered, therefore, might be somewhat similar. Both depend on the vigilance of a Board of Directors to monitor management's performance and behavior. So the structure and functions of the boards overlap in several ways (but not totally, given the pertinent legal requirements). And, as a final level of control, both have regulators to ensure that appropriate community standards are maintained and enforced.
But there is a fundamental difference. The non-profit does not have shareholders who benefit financially from its operations. Its fundamental constituency is the community it serves. For a small community hospital, it is literally the local community. For an academic medical center like BIDMC, it is the local community, but it is also a regional, national, and indeed international community that benefits from the research and educational programs of the hospital.
Is this a difference without a distinction? I think not. I know that our Board and I would be making very different decisions about patient care, research, and training expenditures if we operated under a for-profit rubric. While we always have to be prudent about which services we offer, many more areas that do not generate a profit or that result in perpetual losses would likely be cut or eliminated if we were not a non-profit. As a matter of strict business, many of these could be jettisoned and provided by others outside of our hospital. But we believe that we owe to our patients and to the nurses and doctors who we are training to offer these as part of our public service mission.
As health care costs continue to rise and consume a greater percent of our national economy, we can expect further debates on these issues. Those debates are normal and appropriate and help hold all parties accountable to their constituencies.