The mirage of a “nonprofit” health system

Not-for-profit hospital monopolies are helping make health insurance unaffordable for millions of Americans.

In its Thursday edition, The Wall Street Journal profiles the near monopoly that Carilion Health System has in Roanoke, Virg., and how it uses its monopoly power to inflate prices and enrich its executives.

The impact graph:

Carilion’s market clout is manifest in other ways. With eight hospitals, 11,000 employees and $1 billion in assets, the tax-exempt hospital system has become one of the dominant players in the Roanoke Valley’s economy. Its dozens of subsidiaries include businesses ranging from athletic clubs to a venture-capital fund.

The power of nonprofit hospital systems like Carilion over their regional communities has increased in recent years as their incomes have surged. Critics charge this is creating untaxed local health-care monopolies that drive the costs of care higher for patients and businesses.

The Journal also published a story in its Jan. 17, 2005, edition. about how the Federal Trade Commission was trying to stop monopolistic hospital mergers. I commented on it here.

On Jan. 24, 2007, I said health care reform should include breaking up not only health systems, but also medical groups and large regional insurers.

The Journal continues to call not-for-profit, tax-exempt health care providers “nonprofit.” Its stories show that tax-exempt health care providers are not “nonprofit.”

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3 replies »

  1. While hospital asset concentration to leverage price is the usual motive, the “mantra” and public face on the typical non-profit hospital system merger is to leverage “synergies”, expand services, and reduce costs, though rarely are the target efficiencies realized.
    Rather, prices do go up, and health plans generally fall in line.
    Yet, little if any benefit is pumped back into the community in support of the tax exempt status these systems enjoy. Claiming contractual discounts, allowances for medicaid, medicare, bad debt and charity care, etc., is hardly a substantive gesture towards “community reinvestment” of the tax sheltered gains.

  2. I worked at Community Hospital in Roanoke(the one swallowed by Carillion) as a resident for a year in 1978. Even then, Roanoke hospital (now Carillion) was known and feared as a shark. Too bad these long term “outcome statistics” on cases the Dept of Justice has lost are not required reading for future administrations.
    I think Jeff Goldsmith’s recent post here indicating that the nonprofit status of these hospitals will come under review since the feds will need money badly, is right on target – and it should be. This is getting way out of hand.