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.
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.
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 Running a Hospital, 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.
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
Paul Levy is the CEO of Beth Israel Deaconness Medical Center in Boston and a frequent contributor to THCB. You will find more of his expert commentary on the art and science of managing a major non-profit hospital at his personal blog: "Running a Hospital"