Abandoning Their Mission, Nonprofit Hospitals Have Veered Far Off Course

If healthcare delivery organizations are serious about embarking on the journey to population health management, they must fully commit to the transition required to reach an entirely new, patient-centered model. I’ve detailed the many reasons that organizations should do so before, but as we are constantly being reminded, old habits die hard. This adage holds especially true for nonprofit hospitals, many of which have veered so far off course from their intended purpose and mission in pursuit of higher profits, they now find themselves unable or unwilling to conceptualize a different model. In many cases it’s likely both. Whatever the reasons, their continued fierce resistance to change in the name of profits comes at a steep price.

In 2018, Providence St. Joseph Health, one of the nation’s largest nonprofit health systems, undertook a revenue generating program aptly called “Rev-Up.” As an in-depth The New York Times investigation uncovered, Providence employees were required to find every way possible to obtain payment from patients – even from those financially eligible to receive free or discounted care. Working off of carefully worded scripts, they were instructed to ask pointed questions, even at the bedside, such as “how would you like to pay that today?” One training document was called “Don’t accept the first No,” and another document instructed employees who received patient pushback to say: “we are a nonprofit. However, we want to inform our patients of their balances as soon as possible and help the hospital invest in patient care by reducing billing costs.” And, if payment was not received, the hospital dispatched debt collectors, even going after Medicaid patients in some instances.

Providence tracked their employees’ monthly collection goals on large thermometer shaped charts, even dressing up one worker on Halloween as a wrestler named “Rev-Up Ricky” to tout the program. Of the costume, a Providence spokeswoman later said it was “not the culture we strive for.” While Providence’s “Rev-Up” initiative was lucrative for the nonprofit hospital’s bottom line, patients who were targeted were brought to a financial breaking point. A consumer protection lawsuit brought by the state of Washington against nine Providence affiliated hospitals last year, claimed that more than 54,000 patient accounts, totaling more than $70 million, were sent to debt collection, “despite knowing these patients were eligible for financial assistance.” Lamenting these predatory tactics, one former employee told the paper: “here are people coming in at the worst moment of their lives, and I’m asking them to empty their wallets.”

After the exposé was published, Providence announced they would refund payments to more than 750 eligible low-income patients, citing automation process issues for the billing errors. They said they also stopped using debt collectors to go after low-income patients who qualify for free medical care under state law. And, while the hospital’s chief financial officer said they wanted “to get things right, on behalf of our communities and on behalf of our patients,” it really shouldn’t take a special investigation to do so.

Nonprofit hospitals account for almost 60% of all hospitals in the United States, and like Providence, many find their origins dating as far back as the 19th Century, when they were created by religious orders, namely Catholic nuns, to provide free care to the poor and indigent. In return, nonprofits are granted certain federal, state and local tax exemptions. In 2020, these exemptions added up to just over $28 billion. Providence’s exemptions totaled $1.2 billion in 2019. But, despite these lucrative tax breaks, data and other in-depth reporting show that many of these nonprofits aren’t acting so charitably on other levels.

Last year, a Wall Street Journal analysis of the most recent hospital Medicare cost reports found that nonprofit hospitals wrote off “in aggregate” just 2.3% of their patient revenue on patient financial aid, while for-profits wrote off 3.4%. These figures have remained relatively unchanged over the past five years. According to a new report by the Lown Institute, close to 80% of more than 1,700 nonprofit hospitals studied “spent less on charity care and community investment than the estimated value of their tax breaks.” The report also found that this so-called “fair share” deficit, which was $14.2 billion in 2020, was “enough to erase the medical debts of 18 million Americans or rescue the finances of more than 600 rural hospitals at risk of closure.”

Meanwhile, another Wall Street Journal analysis found that some of our country’s largest nonprofits have either divested or closed more hospitals in communities with high poverty rates in recent years than they have acquired in those areas, while building new facilities in more affluent markets. At one hospital, close to 66% of the facilities it added were in markets where household incomes were at least $200,000, far above the median in that state.

One example of these closures in practice occurred in Richmond, Virginia. The New York Times also reported that after Bon Secours Health System acquired Richmond Community Hospital in 1995, it closed Richmond Community’s ICU in 2017. Founded in the 1900’s, Richmond Community was a health care provider in an underserved community ,“where Black patients could be treated by Black doctors.” The lack of access to intensive care had a disproportionate impact on the community, and in at least one instance resulted in a patient fatality because of the increased time required for transport from Richmond Community to a hospital with an ICU. He died from septic shock while waiting hours to receive care. As an aside, back in 2013 Bon Secours St. Francis Health bought the naming rights to Greenville, South Carolina’s civic, sports and entertainment center, Bon Secours Wellness Arena, a deal worth $4.5 million over ten years.

Together, these examples paint a troubling picture of the state of healthcare delivery today. As I wrote about in Bringing Value to Healthcare, hospitals were never meant to be destinations of choice and, while their facades are adorned with beautiful water fountains, stainless steel and glass and marble walls, they are also not resorts. Behind the ornate architecture lies a clockwork operation too often focused on driving payment instead of delivering on better patient outcomes across the continuum, and we see it manifest itself in many ways.

IT systems are a case in point. Hospitals spend millions on IT, and these investments increase year after year. And, as I said in the book, the great irony here is that despite these investments, hospitals generally haven’t pressured IT vendors for products that support clinical decision making, care path management and quality performance reporting. Instead, they have been utilized primarily for coding and billing purposes and to document care to protect against malpractice lawsuits. Furthermore, these systems are often siloed within hospital departments, which results in basic information being asked over and over again between departments. This redundancy and complexity are just some of the many hallmarks of an outdated and broken fee-for-service (FFS) model that is simply beyond repair.

To be clear, all hospitals have to be profitable at some level in order to function and they certainly can’t or shouldn’t be all things to all people. The late Sister Generose Gervais, who was known for her work in integrating Saint Mary’s Hospital into the Mayo Clinic, said she was often quoted as saying: “No money, no mission.” But she also added “people fail to recite the entire quote: ‘No mission, no need for money.’ Without mission and appreciation of the long heritage of putting the patient first, we are simply earning money and have no reason to be in health care.”

It is simply mind-boggling how delivery organizations, including some of the most renowned academic medical centers in the country, have failed to come to grips with the sobering reality that holding on tight to a FFS model – that has failed them and the patients they serve at every level – is no longer a sustainable course. Now, if they don’t course correct on their own, change will be thrust upon them, whether they like it or not. The winds of change have been building for years.

The Covid-19 public health emergency (PHE) is set to expire in May, which means hospitals can no longer rely on the $175 billion in government assistance they received to weather the pandemic. But even before Covid, a host of converging dynamics were also coming into play, a point I made in my last column and in my book. This includes shrinking reimbursement rates, increased resistance from payers who are no longer free to ride up the cost curve and consumers paying a larger share of plan premiums as more employers move to high-deductible group plans. Hospitals must also compete with continued incursions from large retail disruptors who continue to chip away at the market–making healthcare more affordable, convenient and patient-centric, like never before.

Taking all of these factors together, hospitals and other providers will be forced to account for the value proposition they offer to consumers, payers and other stakeholders in a way that accounts for cost and quality of outcomes across the continuum. It’s clearly time for a new playbook, but as the Civil Rights activist and poet Maya Angelou famously said, “you can’t really know where you are going until you know where you have been.”

Overwhelmingly, healthcare delivery executives acknowledge that population health is the way forward. Unfortunately, far too many of our organizations have been idling in a bad place, both operationally and financially, for far too long. In addition, the longstanding fear of financial loss continues to make their ability to conceptualize and pivot to an entirely new patient-centric model out of reach. Until that changes, we can expect hospitals to continue to find clever ways to game the system in order to keep the procedures churning and the money coming in the door.

The American Hospital Association (AHA), which has been fighting the Centers for Medicare and Medicaid (CMS) Services’ attempts at system reform for years, sent a letter earlier this year to the Department of Health and Human Services (HHS) Secretary to urge continuation of some PHE policies that will sunset when the Covid emergency expires next month. While their concerns are valid, the title of the letter was (ironically): “Creating a Glide Path from Public Health Emergency to a More Effective, Equitable, Patient-focused and Stable Health Care System.” While that sounds good on paper, it ignores the fact that the current FFS system is in large part what led to much of the human and financial toll that the pandemic exacted on the entire healthcare delivery ecosystem. When the system finally buckled under its own weaknesses, it was unsurprising to those who had been paying attention – but few heeded the warning signs, and they will all be left picking up the pieces for years to come.

The pathway to population health continues to be a much more arduous journey than it needs to be, but for that pivot to start happening, and at scale, delivery organizations, and especially nonprofits, have to start by getting back to the roots of their intended mission. But right now, what we are watching is a trajectory that is wildly off course. “Houston, we have a problem.”