Takeaway: Not-for-profit sector continues to struggle to achieve pre-COVID throughput, presenting an opportunity for the taxable hospitals

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The Myth of the Not-For-Profit Hospital | Health Policy Unplugged - 9 15 2021 11 38 55 AM

There is a bias among policy makers and members of Congress in favor of not-for-profit health care.

Last week, at the What's Next Health Conference, Pauline Lapin, Director of the Seamless Care Models at CMMI, expressed concern that venture and private equity's involvement in the new Global and Professional Direct Contracting Model is for for the "right reasons."

Her reservations have some merit. Private equity's involvement in roll-ups and the frequently associated rate-lift, followed by disputes with payers and finally yielding what is likely to be disruptive legislation, No Surprises Act, meant to address "surprise bills" does the industry no good.

Among the naïve, the term not-for-profit conjures up visions of sacrifice - low pay, no stock options, high charity care costs, sack cloth and ashes.

In fact, compensation among non-profit executives is robust, incentive compensation is paid in lieu of stock options, and Medicaid expansion and similar programs have greatly reduced the costs of charity care.

Yes, not-for profit hospitals are frequently large research facilities that take on some of the most difficult cases. They are also richly compensated through the 340B program among others.

Yes, not-for-profit hospitals, by virtue of their long tenure in the health care system are often located in urban areas that once connoted high concentrations of poverty and violence.

Urbanization and gentrification have rendered that argument as myth as most - but certainly not all - cities have been transformed in the last 30 years.

If we look at just one measure of performance between non-for-profit hospitals and their taxable counterparts - managing through a pandemic, the for-profit sector, which mostly consists of THC, HCA, UHS, Lifepoint and a handful of others, has performed quite well.

According to the Quarterly Services Survey released last week by the Census Bureau, one of the few sources of data for these two categories of hospitals, suggests that the taxable hospitals have mostly recovered their throughput with inpatient days and discharges near pre-COVID levels while not-or-profit facilities have not.

Both categories experienced higher revenue per discharge with the not-for-profit facilities appear to have less expense control.

Since hospital capacity is defined by its work force, the inescapable conclusion is that not-for-profit hospitals must be struggling to retain workers. Could it be pay differentials, availability of stock options elsewhere or working conditions? We cannot say.

We have heard anecdotes that nurses prefer HCA hospitals now because they are given more latitude to practice at the top of their license, unlike large research hospitals with classes of residents lurking about.

Policy maker's love affair with not-for-profit everything may continue but with post-COVID promising to be as challenging as COVID for the health care system, performance will matter, which presents an opportunity to take meaningful share.

The Myth of the Not-For-Profit Hospital | Health Policy Unplugged - QSS 2Q