When big money is on the line, hospitals can lose their moral compass

Patrick Malone & Associates P.C. | DC Injury Lawyers
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Patrick Malone & Associates P.C. | DC Injury Lawyers

If corporatists are correct and big, wealthy enterprises legally get rights akin to what real folks have, can it also be true that institutions, like people, sometimes just lose their way?

This argument may be evidenced by the tight-fistedness — eased under adverse publicity — of a legendary children’s charitable hospital and the profit-hungry financial schemes of a major Catholic hospital chain.

Credit is due to:

  • ProPublica, the Pulitzer Prize-winning investigative site, for asking tough questions about the financial support for families and patients that St. Jude Children’s Research Hospital promotes in its national fund-raising juggernaut, a campaign that raised more than $2 billion last year.
  • Stat, a medical and science news site, for digging through complex financial maneuverings to report that Ascension — the nation’s largest Catholic hospital system and a wealthy, tax-exempt organization — “quietly built out a strikingly unusual private equity operation worth more than $1 billion.”

Ascension hasn’t answered a lot of questions as to how its migration of major money into operating what is, effectively, a Wall Street hedge fund benefits patients or their care — other than to assert that the higher its profits, the better it can serve those in need.

St. Jude, in contrast, has scurried to make policy changes to its support programs so its pediatric patients’ parents may be forced less to drain their savings and even to sleep in their cars in the hospital’s parking lot because they are going broke, even as their kids receive charitable care.

The huge Memphis charity miss

Who hasn’t heard of St. Jude and its treatment of needy, sick kids? As ProPublica reported:

“St. Jude is the largest and most highly regarded health care charity in the country. Each year, the Memphis hospital’s fundraisers send out hundreds of millions of letters, many with heart-wrenching photographs of children left bald from battling cancer. Celebrities like Jennifer Aniston and Sofia Vergara sing the hospital’s praises in televised advertisements. This year, St. Jude’s fundraising reached outer space. The SpaceX Inspiration4 mission in September included a former St. Jude patient as a crew member.

“Last year, St. Jude raised a record $2 billion. U.S. News & World Report ranked it the country’s 10th-best children’s cancer hospital, and St. Jude raised roughly as much as the nine hospitals ahead of it put together. It currently has $5.2 billion in reserves, a sum large enough to run the institution at current levels for the next four and a half years without a single additional donation.”

The institution, reporters David Armstrong and Ryan Gabrielson noted, also has a rare pitch to donors in the modern era:

“St. Jude makes a unique promise as part of its fundraising: ‘Families never receive a bill from St. Jude for treatment, travel, housing, or food — because all a family should worry about is helping their child live.’”

Alas, cold reality did not match the hospital promise, ProPublica reported:

“[F]or many families, treatment at St. Jude does not relieve all the financial burdens they incur in getting care for their children, including housing, travel and food costs that fall outside the hospital’s strict limits, a ProPublica investigation has found. While families may not receive a bill from St. Jude, the hospital doesn’t cover what’s usually the biggest source of financial stress associated with childhood cancer: the loss of income as parents quit or take leave from jobs to be with their child during treatment. For many families, the consequence is missed payments for cars, utilities, and cellphones. Others face eviction or foreclosure because they can’t keep up with rent and mortgage payments.

“Parents at St. Jude have exhausted savings and retirement accounts, borrowed from family and friends, or asked other charities for aid. ProPublica identified more than 100 St. Jude families seeking financial help through the online fundraiser GoFundMe, with half of the campaigns started in the past two years. We counted scores of other events like concerts and yard sales organized to help St. Jude families in need.”

Armstrong and Gabrielson dug into the finances of St. Jude, offering data that ought to be disconcerting to patients, their loved ones, politicians, and regulators:

“Only about half of the $7.3 billion St. Jude has received in contributions in the past five fiscal years went to the hospital’s research and caring for patients, according to its financial filings with the Internal Revenue Service. About 30% covered the cost of its fundraising operations, and the remaining 20%, or $1 of every $5 donated, increased its reserve fund.

“Further, ProPublica found, a substantial portion of the cost for treatment is paid not by St. Jude but by families’ private insurance or by Medicaid, the government insurance program for low-income families. About 90% of patients are insured, bringing in more than $100 million in reimbursements for treatment a year. If a family shows up at St. Jude without insurance, a company hired by the charity helps them find it. St. Jude does cover copays and deductibles, an unusual benefit.

“St. Jude spends about $500 million a year on patient services — a figure that includes all medical care and other assistance. Very little of what St. Jude raises from the public goes to pay for food, travel and housing for families, the investigation found. Last year, it was 2% of the money raised, or nearly $40 million.”

ProPublica emphasized in its report the long, renowned charitable work that the hospital has reason to boast about. The institution, though, was clearly stung by its depiction as harmfully stingy to people in crisis, even sending its patients’ families to other charities for help, as Armstrong and Gabrielson also reported:

The help St. Jude provides to families may soon be increasing.

“After ProPublica provided St. Jude with the findings of its reporting, the hospital informed families of a dramatic expansion in the assistance it will give to parents and other relatives during their kids’ treatment in Memphis. Among the most significant changes are increasing travel benefits to two parents instead of one and covering regular trips to Memphis for siblings and other loved ones. St. Jude’s letter to parents said the changes take effect Nov. 15.”

Following the money to different businesses

It’s no secret that too many hospitals and hospital chains have become money-printing factories. But what to do with the cash brimming out of the till? For the St. Louis-based Ascension health system, the answer may be troubling for advocates who think that hospitals should be first and foremost in the business of health care, Stat news reported.

The news site’s full investigation is subscription only and published behind a paywall. But a news article by Stat summarizes the work, raising questions on how, since 2015, Ascension executives chose to seek ever-higher profits by partnering with TowerBrook, a private equity firm, and acting increasingly like a hedge fund. That means the health system has sunk money into outside ventures, including those outside health care, seeking to maximize its returns, Stat found:

“Their first joint investment poured $200 million into an embattled debt collection and billing company. Prior to the Ascension and TowerBrook investment, the company had been accused of illegally trying to collect money from patients, including when they were still in the emergency room. Ascension signed a long-term contract with the company, too, which buoyed the company’s finances. In April of this year, minority shareholders in the company, R1 RCM, filed a lawsuit accusing Ascension and TowerBrook of teaming up to extract $105 million years before they were supposed to.”

Two Ascension executives have left their health system posts to take up new, higher-paying roles in helping to manage the enterprise’s investments. They are making more than the hospital chain CEO.

Stat reported that the health system insists that profits it makes from investments will help it improve and increase its patient care, particularly for those in need, though there’s this information from the news site:

“But while Ascension’s overall investment income has substantially increased since 2015, the level of care the hospital provides for free to needy patients has stayed about the same, about the average for nonprofit health systems. It’s difficult to track how much of that income might be directed to programs to help needy patients, as it feeds into Ascension’s general balance sheet. And even with extra income from its investments, Ascension chose to pursue cuts to at least two safety-net hospitals in Washington, [D.C.], and Milwaukee, Wisc., starting in 2017 and 2018, respectively. Both efforts prompted harsh criticism from community leaders. For Ascension to say, “We are going to chase money down and profiteer to give the money away to people,” I don’t believe that,’ said Roderic Woodson, a former member of the D.C. hospital’s board.”

Ascension, by the way, is not the only huge, rich hospital or health system that has moved into venture capital investing, raising significant questions along the way about institutions’ missions and money, as Jordan Rau, of the independent, nonpartisan Kaiser News Service reported recently.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which turn out to be dangerous drugs.

As patient advocates, politicians, and regulators have sought to deal with bankrupting medical costs, they have paid increasing attention to hospitals, which account for a third of the $3 trillion-plus that Americans spend on health care annually. U.S. hospitals too often not only enjoy sizable tax breaks, notably for purportedly giving charitable care and providing other community benefits, but also they are relatively free to set their own prices.

Sure, big hospitals have been big economic engines in communities from coast to coast, mostly expanding their workforces in billing, marketing, and other areas besides direct patient care. But if hospitals aren’t devoted to research and treatment, and if they want to act like Wall Street equity firms, shouldn’t they get very different scrutiny from the IRS and other regulators?

We have lots of work to do to ensure that rapacious profit-seeking does not harm patients, their loved ones, and their care.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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