CEOs earn big bucks at nonprofit hospitals. But does that benefit patients?

There are much than 4,600 hospitals successful nan U.S., and 49% of them are nonprofit and truthful tax-exempt. The CEOs of these nonprofit wellness systems now earn, connected average, $1.3 cardinal a year. (Getty Images/E+/Getty Images)

Nearly half of hospitals successful nan U.S. are nonprofits, which intends they don’t salary local, authorities aliases national taxes. In return, nan hospitals supply aesculapian care, a societal benefit, to their communities.

They’re besides expected to supply immoderate kindness attraction to patients who cannot pay, and present services that beforehand organization health, specified arsenic vaccine clinics aliases crab screenings.

But contempt their community-focused missions, nan CEOs successful complaint of these nonprofits bid ample paychecks, that now apical $1 million, connected average. And their salaries support rising.

Compensation for CEOs of nonprofit hospitals and aesculapian systems grew by 30% betwixt 2012 and 2019, according to a caller study from Rice University’s Baker Institute for Public Policy.

That intends nan mean paycheck for a apical executive went from conscionable nether $1 cardinal to $1.3 million, according to Vivian Ho, a wellness economist astatine Rice University.

The generous salary for wellness CEOs isn’t needfully a problem, Ho says, if nonprofit wellness systems consistently present connected their mission, which is to supply quality, affordable care.

But Ho worries these large salaries whitethorn beryllium incentivizing CEOs to make decisions that don’t use patients, citing a study she published past twelvemonth showing that larger infirmary profit margins don’t consequence successful much kindness care.

The researchers analyzed national taxation documents and information and recovered that salaries accrued crossed nan board.

However, nan CEOs pinch nan biggest paychecks worked astatine infirmary systems pinch nan largest financial returns.

The mobility is whether nan nonprofit aesculapian systems achieving these rosy profit margins are doing truthful astatine nan disbursal of their missions, subverting nan intended intent of their tax-exempt status.

One study recovered that little than half of nonprofit hospitals notify patients that they suffice for financial assistance earlier attempting to cod connected an outstanding payment.

When it comes to unpaid aesculapian bills, immoderate of nan astir prestigious nonprofit hospitals successful nan U.S. garnish diligent wages, while others cut group off from non-emergency care.

At nan aforesaid time, Americans are little healthy than nan citizens of different high-income countries.

Hospital committee members often don’t activity successful wellness care

Ho theorizes that portion of nan logic that ballooning CEO salary doesn’t construe to much affordable wellness attraction is because executive compensation is decided by nan hospital’s committee members.

Many of those committee members activity successful for-profit sectors, meaning their master experiences and perspectives are often divided from nan intended ngo of nonprofit medicine.

More than half of nan committee members of 15 top-ranked hospitals surveyed activity successful finance aliases business, according to a 2023 study. It besides recovered conscionable 15% of infirmary committee members had objective training aliases worked successful nan wellness services sector.

“[Board members] are not evil,” Ho told NPR. “But I don’t deliberation nan incentives are group up correctly for them to deliberation astir nan well-being of nan full organization and affordability.”

When reached for comment, nan American Hospital Association accused nan Rice study of cherry-picking metrics and pointed to research showing that diligent information has accrued successful past decades.

“The study besides falls short by failing to put infirmary CEOs successful nan discourse of executive talent, by, for example, not comparing infirmary CEOs to those astatine comparably sized organizations successful different fields who are nan talent that hospitals are competing for,” said Rick Pollack, nan association’s president successful an email statement.

Nonprofit hospitals and nan title for managerial talent

Executive salaries are increasing crossed each sectors, and that intends nonprofits are pressured to connection bigger salaries to pull nan champion talent, said Lisa Bielamowicz, MD, a co-founder of nan consulting patient Gist Healthcare.

“[Health attraction is] this very analyzable merchandise pinch tons of technology,” said Bielamowicz. “It’s very, very staff- and labor-intensive. And nan truth that a nonprofit is turning a profit … allows them to reinvest complete time, build a cushion for unsmooth times.”

While Bielamowicz agrees pinch Ho that much transparency is needed connected really infirmary boards group priorities, she explains that moreover nonprofit wellness systems must make a “positive operating margin.”

A affirmative operating separator is what allows nonprofits to support up pinch inflation, clasp nan champion aesculapian talent, and equilibrium treating insured patients pinch those who are underinsured aliases uninsured. If a nonprofit infirmary loses money aliases only breaks moreover twelvemonth aft year, they won’t survive.

Without affirmative operating margins, wellness systems mightiness person to adjacent a agrarian infirmary aliases extremity investing successful needed services, specified arsenic addiction curen aliases glucosuria care. As infirmary managers put it: “no margin, nary mission.”

So financial wellness is crucial, whether a infirmary is for-profit, aliases a nonprofit, said Bielamowicz.

It makes sense, she added, that CEOs get rewarded erstwhile they present connected their organizations’ financial goals.

What’s nan bound betwixt nonprofit and for-profit wellness care?

Ultimately, really overmuch a nonprofit infirmary CEO should beryllium paid is simply a philosophical question, said Ge Bai, a professor of wellness argumentation and guidance astatine Johns Hopkins Bloomberg School of Public Health.

For Bai, nan net study provides much grounds that nan boundaries betwixt nonprofit and for-profit wellness systems successful nan U.S. has go excessively blurry, pinch nan nonprofits operating excessively overmuch for illustration for-profits.

Tax breaks afforded to these nonprofits person allowed them to go hyper-competitive, Bai said, and this has led to a activity of mergers and acquisitions successful nan wellness attraction sector. Back successful 2005, 53% of organization hospitals belonged to a larger wellness system, according to information analyzed by KFF. That jumped to 68% successful 2022.

Unless policymakers intervene, nan consolidation will continue, Bai predicts, driving down title and leaving patients pinch less choices and higher prices.

Bai, for her part, would for illustration elected officials to do much to unit nonprofit wellness attraction to present connected its committedness to taxpayers and their section communities. Through inaction, authorities regulators person allowed nan strategy to go dysfunctional and profit-driven, she explained. It’s elected officials who person nan powerfulness to guarantee these nonprofits really supply a societal use and don’t utilization their tax-exempt status.

It’s why nan inclination toward higher salaries is concerning, Ho argues, because generous compensation rewards nonprofit CEOs for maintaining nan position quo.

This communicative comes from NPR’s wellness reporting business with KFF Health News.