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The Keckley Report

Why Not-for-Profit Hospitals are Soft Targets

By April 18, 2022March 1st, 2023No Comments

Last week, the Lown Institute issued its latest report card on not-for-profit hospitals finding most undeserving of their tax breaks. In its analysis of 2019 tax filings by 1800 hospitals affiliated with 275 systems, it concluded…

·        83% of health systems spent less on charity than the value of their tax breaks, resulting in an $18.4 billion total ‘fair share deficit’ in 2019—an increase from 2018 when 72% had a ‘fair share deficit’ that totaled $17 billion.

·        227 of the 275 spent less on charity than the value of their tax breaks.

·        Hospital total fair share deficits were concentrated in seven states accounting—California, Massachusetts, Pennsylvania, Ohio, Illinois, New York, and Michigan.

In response, the American Hospital Association (AHA) released a statement criticizing the Lown Institute’s “faulty methodology” and defending hospitals’ use of financial resources. Per AHA, “hospitals of all types have provided nearly $745 billion in uncompensated care to patients since 2000.”

Background: Lown Institute’s Fair Share Analysis

The Lown Institute (LI) is a think tank focused on the negative impact of corporatization in U.S. healthcare: “The industrialization of health care has disrupted the healing relationship between clinicians and patients. Profits have been prioritized over healing. It’s time for a health system worthy of our nation, a system that rejects low-value careincentivizes healing over profitspromotes health equity, and honors the value of the clinician-patient relationship. The Lown Institute believes that a radically better American health system is possible.”

LI is funded by notable foundations including the Robert Wood Johnson Foundation, Well Being Trust, Gordon and Betty Moore Foundation, Commonwealth Fund, Intermountain Foundation and others. It has focused particular attention on low-value care in recent years which it says accounts for one-third of total health spending. “By reducing overuse, overtreatment and overdiagnosis, we not only reduce financial waste, but we ensure that patients get all the care they need, and avoid the preventable harm from care they do not need.”

Among its attention-getting activities:

·        The Shkreli Awards is the Lown Institute’s annual top-ten list of the worst examples of profiteering and dysfunction in health care, named for Martin Shkreli, the price-hiking “pharma bro” that everyone loves to hate. These stories highlight the systemic nature of greed in health care, demonstrating what can happen in a system that puts profits over patients.

·        The Lown Institute Hospitals Index which allows users to profile individual hospitals on 53 measures.

·         And its Fair Share Deficit report which gets widespread media attention.

LI calculates ‘fair share spending’ based on a system’s reported spending for charity care and community investment based on itemization in IRS Schedule H in the hospital’s Form 990 filing. “Hospitals that dedicated at least 5.9% of overall expenditures to charity care and meaningful community investment were considered to have spent their fair share.” (Note: LI’s 5.9% threshold is based on a 2012 study that concluded “the value of the tax exemption averages 5.9% of total expenses, while total community benefits average 7.6% of expenses, incremental nonprofit community benefits beyond those provided by for-profits average 5.7% of expenses, and incremental charity alone average 1.7% of expenses. The incremental community benefit exceeds the tax exemption for only 62% of nonprofits.”)

Its methodology includes many widely accepted measures of community benefit activity i.e. subsidized care, addiction treatment programs, community-health improvement activities like health fairs, immunizations and interpreter services, contributions to community groups and programs that address social determinants of health i.e. food assistance et al.

It excludes Medicaid shortfall, health professions education, and research. “Hospitals offer discounted rates for most insured patients, yet these are not considered community benefits; it is unclear why discounts for Medicaid patients should be an exception. While charity care spending reflects the amount patients would pay absent of hospital policy, Medicaid shortfall does not convey a hospital policy choice.”

My take

Whether 5.9% is the right target is debatable. Whether “community-benefit” is a reliable basis for tax breaks for not-for-profit hospitals deserves fresh review. Whether “not-for-profit” designations for hospitals mean anything to consumers merits objective reflection.

What’s clear is that hospitals are a soft target. The afterglow from pandemic-heroics has worn off. The emergency rooms that took in victims in the weekend’s 3 mass casualty incidents is yesterday’s news. In many communities, the public’s consciousness about its hospitals is more closely associated with big business than community health. It contributes to a decline in the public’s confidence in our health system. Consider:

Gallup Polls show trust in America’s institutions including its health system is shrinking: from November 2020 to March 2022:

·        Trust in Public education decreased from 62% to 54%

·        Trust in Local government decreased from 63% to 54%

·        Trust in US Gov’t decreased from 48% to 43%

·        Trust in the Health System decreased from 51% to 44% (it was 80% in 1975)

In Morning Consult’s March 2022 polling, confidence in the U.S. health system is especially problematic in younger generations: confidence in the system was 43% in Gen Z, 46% among Millennials, 58% in Gen X and 69% among Boomers.

And exacerbating distrust, payers and employers have spiked attention to hospital prices that average 180% of Medicare rates for privately insured individuals—and even higher if the hospital is operated by a private equity fund or multi-hospital, investor-owned system.

Lown Institute’s Fair Share Deficit calculation methodology is debatable; what’s not is the growing prominence of hospitals in the public’s consciousness accompanied by a significant decline in the public’s trust in the health system. That makes hospitals a soft target.



Tracking Trust in US Institutions April 14, 2022

National Health Expenditure Projections, 2021–30: Growth To Moderate As COVID-19 Impacts Wane Health Affairs March 28, 2022

Rand: Trends in Hospital Prices Paid by Private Health Plans Varied Widely Across the United States Health Affairs April 2022

Nonprofit hospitals are holding onto billions in taxpayer dollars Lown Institute April 14, 2022

Americans’ Confidence in Major U.S. Institutions Dips Gallup



NY nurse practitioners (NPs) get OK to practice independently: As part of the state budget signed by Gov. Kathy Hochul (D) on April 9, NPs with more than 3,600 hours of experience no longer need a formal relationship with a medical doctor to practice and can “evaluate patients; diagnose, order and interpret diagnostic tests; initiate and manage treatments; and prescribe medications.” NY is the 25th state to grant authorization.

Nurse Practitioners in New York Granted Full Practice Authority MedPage April 12, 2022

Prescription Drugs

CMS defends Aduhelm decision: In the aftermath of its controversial decision to limit Biogen’s Aduhelm to clinical study participants 2 weeks ago, Centers for Medicare and Medicaid Services, said the organization’s ruling “should not be viewed as setting a new direction on therapies that receive FDA accelerated approval.” Experts say CMS’s authority to tightly limit reimbursement for the drug is on shaky legal ground, and a lawsuit possible.

CMS Finalizes Medicare Coverage Policy for Monoclonal Antibodies Directed Against Amyloid for the Treatment of Alzheimer’s Disease April 7, 2022

FDA warns to rogue pharmacies: The FDA and DEA are warning patients to toss drugs purchased from two unregistered pharmacies accused of illegally selling Adderall. and were both accused of selling amphetamine drugs marketed as the ADHD drug Adderall without a prescription, according to an FDA statement on Tuesday. The agency also claims the pharmacies (which failed to register with the DEA) sold the medication without the proper labeling.

So far in 2022, the FDA has issued six warning letters to various online pharmacies for the unlawful sale of drugs over the internet. However, these two warnings were specifically for the sale of Schedule II drugs — drugs designated by the DEA to have high potential for abuse. Adderall abuse, especially among students and young adults, has been a widespread issue for the past two decades.

US Food and Drug Administration

Health Status

Study: US life expectancy decrease in 2019-2020 higher than other developed societies: US life expectancy decreased by 1.87 years overall, and by 3.70 years in Hispanic populations and 3.22 years in non-Hispanic Black populations. The decrease in life expectancy in 21 peer high income countries was a mean of 0.58 years, with no country experiencing a decrease rivaling that of the US.

Since 2010, while life expectancy in other countries continued to increase, US life expectancy has remained stagnant and decreased for 3 consecutive years in 2014 to 2017, widening the life expectancy gap with peer nations.

Woolf et al Changes in Life Expectancy Between 2019 and 2020 in the US and 21 Peer Countries”JAMA Netw Open. 2022;5(4):e227067. doi:10.1001/jamanetworkopen.2022.7067

Study: physical fitness correlates to reduce depression: This systematic review and meta-analysis of 15 prospective studies including more than 2 million person-years showed an inverse curvilinear association between physical activity and incident depression, with greater differences in risk at lower exposure levels. Adults meeting physical activity recommendations (equivalent to 2.5 h/wk of brisk walking) had lower risk of depression, compared with adults reporting no physical activity.

Pearce et al Association Between Physical Activity and Risk of Depression: A Systematic Review and Meta-analysis JAMA Psychiatry. Published online April 13, 2022. doi:10.1001/jamapsychiatry.2022.0609

NEJM Editorial: Firearms major cause of death among youth: For more than 60 years, motor vehicle crashes were the leading cause of injury-related death among young people. Beginning in 2017, firearm-related injuries became the most common cause of death from injury due to both the rising number of firearm-related deaths and reduction in deaths from motor vehicle crashes. “The crossing of these trend lines demonstrates how a concerted approach to injury prevention can reduce injuries and deaths — and, conversely, how a public health problem can be exacerbated in the absence of such attention. Between 2000 and 2020, the number of firearm-related deaths among children, adolescents, and young adults increased from 6998 (7.30 per 100,000 persons) to 10,186 (10.28 per 100,000 persons) per the CDC. “

Lee et al Crossing Lines — A Change in the Leading Cause of Death among U.S. Children NEJM April 16, 2022 DOI: 10.1056/NEJMp2200169 

University of Michigan Poll: Americans Want to Age in Place but unprepared: The U of M National Poll on Healthy Aging poll: surveyed more than 2,200 U.S. adults in January- February this year. Findings:

·        62% said aging in place was “very important” and 26% called it somewhat important. 12% said it wasn’t important to them.

·        28% reported living alone, 33% said they didn’t have someone who could help them with personal care and 43% said they were not confident in their ability to pay for personal or home services if needed.

·        Current in-home access features: Main floor bathroom (88%), Main floor bedroom (78%), Door frames wide enough for a wheelchair (54%), Shower chairs or benches (36%), Raised toilet seats (36%), Grab bars in bathroom (32%), Lever-style door handles (32%), Home entrances with ramps or no stairs (19%), Barrier-free shower (7%)

National Poll on Healthy Aging, University of Michigan April 13, 2022

Study: ACOs with greater population ethnicity associated with higher out of network use, lower quality: In this retrospective cohort study of 528 Medicare ACOs, the ACOs that cared for more patients of racial and ethnic minority groups had significantly higher rates of out-of-network primary care than those that cared for fewer patients of racial and ethnic minority groups. The level of out-of-network primary care was negatively associated with performance among ACOs with many patients of racial and ethnic minority groups across most quality metrics examined.

Bakre et al Association Between Organizational Quality and Out-of-Network Primary Care Among Accountable Care Organizations That Care for High vs Low Proportions of Patients of Racial and Ethnic Minority Groups JAMA Health Forum April 15,. 2022;3(4):e220575. doi:10.1001/jamahealthforum.2022.0575

Technology, HIT

Study: PHI breaches lessened by e-mail advisory: Background: one quarter of PHI breaches were caused by employees’ unauthorized access to PHI, in which the employee lacked authorization, permission, or other legal authority to access the data. From January 1 to July 31, 2018, a large academic medical center’s PHI access monitoring system flagged all unauthorized accesses to patient electronic medical records from 444 employees (all professional medical staff), who were not part of the patient’s intervention team and did not have access permission. Result of e-mail notification:

From January 1 to July 31, 2018, only 4 of the 219 employees (2%) in the intervention group committed unauthorized access for a second time while 90 of the 225 employees (40%) in the control group did so, representing a 95% effectiveness of email warning in reducing repeated offenses (2% vs 40%).

Effectiveness of Email Warning on Reducing Hospital Employees’ Unauthorized Access to Protected Health Information A Nonrandomized Controlled Trial JAMA Netw Open. April 13,2022;5(4):e227247. doi:10.1001/jamanetworkopen.2022.7247


 CMS announces “birthing friendly” hospital designation: Hospitals can begin receiving a “birthing-friendly” designation from the Centers for Medicare and Medicaid Services in fall 2023 based on the Hospital Inpatient Quality Reporting Program’s maternal morbidity structural measure. The metric requires hospitals to attest whether they participate in a state or national perinatal quality improvement collaborative program and whether they have implemented safety practices or bundles to address birth complications such as hemorrhages and sepsis.

CMS April 13,

Health Insurance

Study: MA enrollees concerned about food security, affordability: Among older adults enrolled in Medicare Advantage, health-related social needs are highly prevalent, with financial strain, food insecurity, and poor housing quality the most commonly reported. The distribution of health-related social needs is uneven, with significant disparities according to race, socioeconomic status, and sex.

Long et al Health-Related Social Needs Among Older Adults Enrolled In Medicare Advantage

RWJ study: 2022 health insurance premiums in Affordable Care Act marketplaces declined in 32 states: states in 2022 per the study conducted for Urban Institute.

  • Marketplace plan premiums decreased 1.8% for the third straight year:

  • Employer-sponsored plan premiums increased 3.6%

  • 32 states saw marketplace premiums decrease vs. 18 that increased

  • The number of payers participating in the marketplace increased from 198 to 288 between 2020 and 2022 in the regions analyzed.

  • The presence of one payer meant premiums were $189.50 per month higher on average compared to a market with five or more payers.

  • Premiums were lower if the rating region was in a state that expanded Medicaid, had a reinsurance policy or had a state-based marketplace.

Marketplace Competition and Premiums, 2019–2022 Urban Institute April 13, 2022

Addiction, Drug Abuse

House Oversight Committee report on McKinsey’s role in opioid epidemic: The committee’s 53-page report found 37 contracts staffed by at least one McKinsey consultant who simultaneously or previously worked for Purdue and McKinsey failed to disclose its relationships with opioid manufacturers to FDA. Example: “In 2011, at least four McKinsey consultants working on a $1.8 million FDA contract to enhance drug safety and address ‘the adverse impact of drugs on health in the US’ were simultaneously working for Purdue—including on projects designed to persuade FDA of the safety of Purdue’s opioid products.”

in February, agreed to pay $573 million to 53 attorneys general to resolve allegations that it aggressively promoted the sale of higher doses of opioids. From 2008 to today, McKinsey worked on 76 contracts for the FDA, and the agency paid McKinsey more than $140 million since 2008.

Committee Releases Report Uncovering Significant Conflicts of Interest at McKinsey & Co. Related to Work for FDA and Opioid Manufacturers April 13, 2022

Study: illicit fentanyl’s responsible for adolescent overdose deaths: Adolescent drug use rates remained generally stable between 2010 and 2020, with 30.2% and 30.4%, of 10th-graders reporting any illicit drug use in the past 12 months, which declined to 18.7% of 10th-graders in 2021. However, given the increase in illicit fentanyls and potential associated risks, we assessed shifts in overdose deaths among adolescents.

Friedman et al Trends in Drug Overdose Deaths Among US Adolescents, January 2010 to June 2021JAMA. April 12, 2022;327(14):1398-1400. doi:10.1001/jama.2022.2847


Medscape: physician compensation up 7% in 2021: Of the 29 specialties surveyed, plastic surgery averaged the highest compensation at $576,000 while public health and preventative medicine ranked lowest at $243,000. Primary care doctors earned $260,000 on average while specialists average $368,000.

Medscape’s Physician Compensation Report

Study: surgeon political donations significant in 2020: In 2020, 53,944 donations were made by surgeons in the United States, totaling $9,223,350.68 led by orthopedic surgeons, ophthalmologists, neurosurgeons, urologists and plastic surgeons. Of these donations, 59.46% were made to the Republican party ($5 420 326), 30.83% were made to the Democratic party and 9.71% were made to nonpartisan (i.e., independent) organizations

Barpujari et al Political Campaign Contributions of Surgeons in the United States Throughout the 2020 Election Cycle JAMA Surg. Published online April 13, 2022. doi:10.1001/jamasurg.2022.0798

White House

White House Equity Task Force announces equity plans in key agencies: More than 90 federal agencies released their Equity Action Plans last Thursday. Examples:

  • Interior: National Parks accessibility to people with disabilities and reduce discrimination against LGBTQI+ people.

·        Homeland Security: trainings to improve its airport screenings of people of color, and push grant programs fighting white supremacists and other domestic terrorists.

·        Housing and Urban Development: reduce bias in home appraisals through the interagency Task Force on Property Appraisal and Valuation Equity.

·        Commerce: broadband infrastructure in rural and tribal communities.

·        Veterans Affairs: social and economic determinants of health for LGBTQI+ veterans.

·        NASA: data re: environmental challenges in underserved communities

FACT SHEET: Biden-⁠Harris Administration Releases Agency Equity Action Plans to Advance Equity and Racial Justice Across the Federal Government White House April 14, 2022

Deals, Investors

Baker Donelson deal outlook for 2022 strong, private equity, strategics expanding: Deal 2022 started strong for healthcare transactions with some reports suggesting a record-breaking January. Although deal activity cooled in February and March, transaction pipelines still indicate that 2022 is on pace to match or exceed the historically high activity of 2021.

Healthcare Transactions Q1 2022 Baker Donelson April 14, 2022

LevinPro LTC: SNF deals down in 1Q 2022: The number of publicly announced deals in the first quarter of 2022 fell to 127 deals compared to 140 transactions in QQ 2021 — a 9% decrease. Dealmakers spent $3.87 billion on first quarter transactions in the space, a 2% decline compared to the previous quarter’s total of $3.94 billion.

LevinPro LTC Long-term care deals, data, news, and insights

Kaufman Hall: first quarter deals fewer: Per KH, there were 12 announced M&A transactions in 1Q 2022 vs. 13 in 1Q 2021 and 25-30 quarterly from 2016-2020.

  • 7 of the 12 had for-profit sellers, which is an all-time high and 1 involved a for-profit acquirer.

  • Transactions were smaller than other quarterly transactions in prior years averaging was $246 million in Q1 2022 vs. historic high in 2021 ($619 million for the first quarter).

M&A Quarterly Activity Report: Q1 2022 Kaufman Hall April 7, 2022

CBRE Senior Housing & Care Investor and Developer survey: SNF development likely to slow: Price per bed valuations increased in the skilled nursing in 2021 but demand shrinking in 2022. Findings:

·        $25 billion will be invested in health care real estate in 2022 – and while investment in life sciences real estate, medical office buildings and ambulatory services is expected to pick up – investment interest in SNFs will slow. Only 19% of respondents said they expected higher demand for SNF assets in 2022, while 58% expected it to be the same and 23% expected demand to decrease. Only 10% of respondents said they were most interested in SNFs. Medical office buildings, on the other hand, were the most sought-after asset.

·        Interest is highest for MOBs, ASCs and behavioral health facilities

CBRE Senior Housing & Care Investor and Developer Survey

CB Insights: digital health investing down in 1Q 2022: Global digital health funding reached $10.4B in Q1’22, a 36% decrease compared to Q4’21 and a 6-quarter low.  M&A activity in the digital health sector remained above 100 deals for the 7th consecutive quarter, clocking in at 138 total deals.”

CB Insights Digital Health Report Q1 2022