Nonprofit hospitals juggle earning with charity mission

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By Linda Shrieves
Sunday, August 29, 2010

ORLANDO - When Florida Hospital and United Healthcare started their public wrangling over a new contract this summer, each side pointed to the other company's profits.

Both companies are health-care behemoths. Minnesota-based United Healthcare is the largest health insurer in the United States, with profits of $3.8 billion in 2009. Adventist Health System, which operates Florida Hospital system, is the largest nonprofit Protestant health-care provider in the nation, operating 37 hospitals in 12 states and generating $363 million in profit in 2009.

But in the high-dollar world of health care, what does it mean to be a nonprofit hospital that makes big profits?

"If you go back 100 years, these were charity hospitals. They took care of the poor," said Frank Sloan, a professor of health-care economics at Duke University. "But as health care has grown, they've become commercial. Now these nonprofits are in a big business."

Today's nonprofit hospitals, which make up slightly more than half of the nation's 5,000 community hospitals, are trying to juggle the demands of making money with being a charitable organization.

"You're supposed to show a good bottom line, but at the same time you're supposed to show that you lost tons of money by giving charity care," said Jessica Berg, a law professor at Case Western University who has studied the nonprofit-hospital system and its tax structure. "We're used to thinking of churches and religious organizations as nonprofits. Whoever thinks of a for-profit church?"

For legislators across the United States, there's growing tension over the fact that massive nonprofit-hospital organizations don't pay any taxes.

"The question is: What is the nonprofit doing that for-profits are not? We're giving them a huge tax benefit," Berg said. "So what's the trade-off? You're not paying taxes, so what are you giving the community?"

Community benefit

For nonprofit hospitals, much of the community benefit is measured in two ways: through charity care and "community-benefit programs," which can range from health fairs to glaucoma screening.

Charity care - the free care that hospitals provide to a patient with no insurance or the amount of a bill they write off because a patient is unable to pay - has come under fire from legislators across the country as questions arise about how much the hospitals are writing off.

In 2008, in documents provided to the state of Florida, Florida Hospital reported spending $442 million, or 7 percent of its patient revenue, on charity care. Its competitor, nonprofit Orlando Health, spent $213 million, 4 percent of its patient revenue, on charity care.

Florida Hospital accepts more Medicaid patients than any hospital system in the state except Jackson Memorial in Miami, said Richard Morrison, Florida Hospital's regional vice president for governmental relations.

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