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The Keckley Report

The Conundrum facing Not-for-Profit Hospital Systems

By November 6, 2023No Comments

Does hospital ownership matter? According to a study published last week in Health Affairs Scholar, NOT MUCH. That’s a problem for not-for-profit hospitals who claim otherwise.

58% of U.S. hospitals are not-for-profit hospitals; the rest are public (19%) or investor-owned (24%). In recent months, not-for-profit systems have faced growing antagonism from regulators and critics who challenge the worthwhileness of their tax exemptions and reasonableness of the compensation paid their top executives.

The lion’s share of this negative attention is directed at large, not-for-profit hospital system operators. Case in point: last week, Banner Health (AZ) joined the ranks of high-profile operators taken to task in the Arizona Republic for their CEO’s compensation contrasting it to not-for-profit sectors in which compensation is considerably lower.

Unflattering attention to NFP hospitals, especially the big-name systems, is unlikely to subside in the near-term. U.S. healthcare has become a winner-take-all battleground increasingly dominated by large-scale, investor-owned interests in hospitals, medical groups, insurance, retail health in pursuit of a piece of the $4.6 trillion pie. The moral high ground once the domain of not-for-profit hospitals is shaky.

The NYU study examined whether hospital ownership influenced decisions made by consumers: they found “Fewer than one-third of respondents (29.5%) indicated that hospital status had ever been relevant to them in making decisions about where to seek care…significantly more important to respondents who indicated the lowest health literacy—74.7% of whom answered the key question affirmatively—than it was for people who indicated high health literacy, of whom only 18.3% found hospital ownership status to be relevant…also considerably more relevant for people working in health care than for those who did not work in health care (61.0% vs 24.5%)…

We found little evidence that hospital nonprofit status influenced Americans’ decisions about where to seek care. Ownership status was relevant for fewer than 30% of respondents and preference was greatest overall for public hospitals. Only 30–45% of respondents could correctly identify the ownership status of nationally recognized hospitals, and fewer than 30% could identify their local hospitals. These findings suggest that contract failure does not currently provide a justification of nonprofit hospitals’ value; further scrutiny of tax exemption for nonprofit hospitals is warranted.”

Are NFP hospitals concerned? YES. It’s reality as systems address near term operational challenges and long-term questions about their strategies.

Last weekend, I facilitated the 4th Annual Chief Strategy Officers Roundtable in Austin TX sponsored by Lumeris. The group consisted of senior-level strategists from 11 not-for-profit systems and one for-profit. In one session, each reacted to 50 future state scenarios in terms of “likelihood” and “disruptive impact” in the NEAR term (3-5 years) and LONG TERM (8-10 years) using a 1 to 10 scale with 10 HI. The extracted findings below and the robust discussion that followed shed light on how organizations are adapting:

  3-5 Years   8-10 Years  
Scenario Likelihood








The U.S. health system will become a 2-tiered system: a private system and a public system. 1.7 6.9 5.7 7.7
Congress will impose price controls on the majority of hospital services. 2.9 7.5 5.4 7.6
Integrated health systems that operate hospitals, medical groups, post-acute & home care services and self-sponsored health insurance plans (payviders) will be the dominant structure in which care is provided and funded. 3.6 5.6 6.1 6.9
U.S. voters will approve a single-payer/Medicare for All system by 2033. NA NA 3.0 7.9
Competition in healthcare will be between regional, fully integrated systems of health sponsored by legacy insurers, health systems or retail health organizations. 3.8 7.0 5.1 6.8
The distinctions between for-profit and not-for-profit hospitals will significantly shrink in healthcare public policy. 3.8 5.5 6.4 5.5
Private equity ownership of hospitals and medical practices will be severely restricted 3.8 4.4 4.5 4.7
General acute hospitals will become public utilities. 2.3 6.8 3.9 7.0
Compensation for NFP hospital CEOs will be regulated. 2.5 5.5 4.6 5.4


From these data and the discussion that followed, there’s consensus that the U.S. healthcare market is unlikely to change dramatically long-term, their short-term conditions will be tougher. and their challenges unique.

  • ‘Near-term cost containment is a priority. Hospitals are here-to-stay, but operating them will be harder.’
  • ‘Increased scale and growth are necessary imperatives for their systems.’
  • ‘Hospital systems will compete in a market wherein private capital and investor ownership will play a growing role, insurers will be hostile and value will the primary focus of cost-reduction by purchasers and policymakers.’
  • ‘Distinctions between not-for-profit and for-profit hospitals are significant.’
  • ‘Conditions for hospitals will be tougher as insurers play a stronger hand in shaping the future.’

Given the NYU study findings (above) concluding NFP ownership has marginal impact on hospital choices made by consumers, it’s understandable NFPs are anxious.

My take:

The issues facing not-for-profit hospitals in the U.S. are unique and complex. Per the commentary of the CSOs, their market conditions are daunting and major changes in their structure, funding and regulation unlikely. That means lack of public understanding of their unique role is a conundrum. 


PS: Issues about CEO compensation in healthcare are touchy and often unfair. In every major NFP system, comp is set by the Independent Board Compensation Committee with outside consultative counsel. The vast majority of these CEOs aren’t in the job for the money joining their workforce in pursuit of the unique higher calling afforded service leaders in NFP healthcare.


Taylor et al “Public perceptions of US for-profit, nonprofit, and public hospitals” Health Affairs Scholar, Volume 1, Issue 4, October 2023, qxad046,

Most Arizona Hospital CEOs got Raises, made millions during pandemic, IRS Filing Say Arizona Republic October


Re: lawsuit by AHA, THA against HHS information blocking rule: “The Department of Health and Human Services’ new rule restricting the use of critical third-party technologies has real-world impacts on the public, who are now unable to access vital health information. In fact, these technologies are so essential that federal agencies themselves still use many of the same tools on their own webpages, including,,, and various Veterans Health Administration sites. We cannot understand why HHS created this ‘rule for thee but not for me.”

AHA President and CEO Rick Pollack 

Re: “Today there remains a sense — both inside Apple and in the broader world of public health — of unfulfilled potential. The company’s effort to weave health monitoring and disease prevention into its bestselling devices has yielded breakthroughs, but the strategy has also been short-circuited by philosophical disagreements, a culture of conservatism and technological realities. Apple has scrapped or slowed work on a broad range of promising projects, frustrating some of the doctors and engineers it hired to work on them… In Apple’s envisioned future, individuals would rely less on specialized medical devices, such as blood pressure monitors and thermometers, reducing the need for frequent blood tests and physician appointments, according to the publication.

Even the tech giant’s CEO, Tim Cook, has articulated that enhancing health represents the most significant contribution his company can make to humanity.

This future…holds significant potential for Apple’s profitability as the health and fitness tracking market is experiencing rapid expansion, with forecasts suggesting it could evolve into a nearly $200 billion-per-annum industry within the next decade.”

Bloomberg “Apple Has Plans to Eventually, Maybe Revolutionize Health Care” November 1, 2023

Re: Specialist shortage in rural communities: “There is a persistent shortage of primary care doctors in the rural United States. Specialists, like OB-GYNs and endocrinologists, are even harder to access. there are only 30 specialists for every 100,000 residents in rural areas, compared to 263 per 100,000 in urban communities. These shortages mean that many patients must routinely drive long distances to see their doctors, or simply go without care. This leaves rural populations more vulnerable to developing more serious illnesses.”

National Rural Health Association

Re: Medical debt on credit reports:  “the share of consumers with medical debt in collections declined, from 16.0% in August 2018 to 12.6% in February 2022 to 11.6% in August 2022 and with 5.0%  in August 2023. We estimate more than 15 million consumers might have had all their medical debt in collections erased from their credit files in the past year.”

Urban Institute’s credit bureau data, August 2018 through August 2023 Urban Institute October 31, 2023

Re: Medicare Advantage prior authorization concerns: “Medicare Advantage plans are entrusted with providing medically necessary care to their enrollees. While CMS has recently made considerable strides in ensuring that this happens, more work is needed with respect to reining in inappropriate use of prior authorization by MA plans, particularly when using AI/algorithmic software. We applaud the Biden Administration’s recent Executive Order released on October 30, 2023 to establish the first set of standards on the use of artificial intelligence in health care, and we encourage CMS to incorporate the measures outlined above to protect Medicare beneficiaries suffering from illnesses and injuries and prevent future AI-related harms in health care.”

Letter to CMS November 3, 2023 from 32 House Democrats


Mercer: healthcare financial hardship for working-age population: The number of large employers offering at least one free medical plan to employees increased from 11% this year (2023) to 15% in 2024. 34% of the largest employers — defined as having 20,000 or more workers — are offering salary-based contributions, up from 29% this year. One in four workers don’t feel they can afford their health care needs without causing financial hardship:

Share of 4505 full-time employees who work in companies with at least 250 employees who say they can afford the healthcare they need without financial hardship by income group (Q32023):

  • $30K or less: 51%
  • $30-60K: 60%
  • $60-100K: 79%
  • $100-200K: 89%
  • $200K+: 91%

Mercer 2023-2024 Inside Employees’ Minds

Study: social media use: “Most adults who use social media perceive some (46%) or a lot (36%) of false or misleading health information on social media, but nearly one-fifth reported either none or a little (18%). More than two-thirds of participants reported that they were unable to assess social media information as true or false (67%). Our study identified certain population groups that might be a focus of future intervention work, such as participants who use social media to make decisions. The perception by social media users that false and misleading health information on social media is highly prevalent may lend greater urgency to mitigate the spread of false or misleading health information that harms public health.”

Jim P Stimpson, Alexander N Ortega “” Social media users’ perceptions about health mis- and disinformation on social media Health Affairs Scholar, Volume 1, Issue 4, October 2023, qxad050,

Care Management

Lown study: Stent overuse, cost: Lown analyzed stent procedure data for 1733 hospitals from 2019-2021: Findings:

  • 22% coronary stents (229,000) placed in Medicare patients were unnecessary at a cost of $2.44 primarily because  they provide no benefit over medication therapy for patients with stable heart disease.
  • The unnecessary procedures also cost patients $1,600 out of pocket and increase the risk of tears in the artery, blood clots and kidney damage.

Lown Institute October 31, 2023\

Study: disparities: In this cross-sectional study of Black and White adults in the US, health care expenditure disparities diminished or disappeared under conditions of both racial and economic equity and equitable health care access; in areas that were mostly high income and had mostly White residents, Black adults spent substantially less. Results underscore the continuing need to recognize place as a contributor to race-based differences in health care spending.

Dean et al Health Care Expenditures for Black and White US Adults Living Under Similar Conditions JAMA Health Forum November 3, 2023;4(11): e233798. doi:10.1001/jamahealthforum.2023.3798


Study: healthcare workforce recovery from pandemic: This study estimated recovery since the initial decrease in employment after the March 2020 public health emergency across US health care subsectors through the end of 2022. Findings:

  • In the prepandemic period, health care employment increased by 0.6% per quarter whereas non–health care employment increased by 0.4% per quarter. During the pandemic period, health care employment increased by 0.1% per quarter vs 0.3% for non–health care employment.
  • Health care employment decreased less rapidly than non–health care employment in 2020 from Q1 to Q4, −4.3% vs −7.2% but recovered less quickly in 2022 (−5.0% vs −2.4%).
  • Employment in hospitals increased by 0.4% per quarter prepandemic and by 0.03% per quarter during the pandemic, whereas employment in physicians’ offices increased by 0.6% per quarter and 0.5% per quarter respectively.

Nquyen et al “Changes in Employment in the US Health Care Workforce, 2016-2022”JAMA November 2, 2023. doi:10.1001/jama.2023.18932


Study: Healthcare Delivered by Nurse Practitioners and Physician Assistants 2013-2019: Researchers analyzed data for 276 million visits. Highlights:

  • The proportion of all visits delivered by nurse practitioners and physician assistants in a year increased from 14.0% to 25.6%.
  • In 2019, the proportion of visits delivered by a nurse practitioner or physician assistant varied across conditions, ranging from 13.2% for eye disorders and 20.4% for hypertension to 36.7% for anxiety disorders and 41.5% for respiratory infections.
  • Among all patients with at least one visit in 2019, 41.9% had one or more nurse practitioner or physician assistant visits.
  • Compared with patients who had no visits from a nurse practitioner or physician assistant, the likelihood of receiving any care was greatest among patients who were lower income (2.9% greater), rural residents (19.7%), and disabled (5.6%).

BMJ, Provision of evaluation and management visits by nurse practitioners and physician assistants in the USA from 2013 to 2019: cross-sectional time series study, September 2023

Regulatory Announcements Last Weeks

CMS 2024 Final Payment rules: Last week, CMS released annual payment updates and additional guidance for physicians, hospital outpatient settings and the Medicare Shared Savings Program as well as a remedy for the 340B-acquired drug payment policy. Highlights:

  • Physicians: the physician fee schedule conversion factor for 2024 is $32.74, a $1.15 (3.4%) decrease from the 2023 conversion factor of $33.89.
  • Hospital Outpatient Prospective Payment System and ASC rule: CMS finalized payment rates for hospitals and ASCs that meet applicable quality reporting requirements by 3.1%–slightly more than the 2.8% payment update initially proposed.
  • 340B-acquired drug payment final rule: CMS will provide a lump sum payment to each hospital participating in the 340B Drug Pricing Program, totaling $9 billion, to make them whole from unlawful payment cuts from 2018 to 2022.
  • OP Conversion Factor: To implement a required $7.8 billion budget neutrality adjustment, CMS will reduce future non-drug item and service payments by adjusting the Outpatient Prospective Payment System conversion factor by -0.5% beginning in 2026. The agency said it landed at -0.5% to minimize the financial burden of this required offset on affected hospitals.

CDC: The U.S. infant mortality rate rose 3%, with 20,538 deaths recorded in 2022 to 5.6 infant deaths per 1,000 live births in 2022 vs. 5.44 per 1,000 live births in 2021 — marking the first year-over-year increase since 2001 to 2002 after a decades-long overall decline. Highlights:

  • Increases among all ethnicity groups except for the infants of Asian women were found.
  • Deaths among infants of Black women remained the highest of all the groups, with almost twice the U.S. average at 10.86 per 1,000 births.
  • For infants of Native American or Alaska Native women, mortality rates “increased significantly” from 7.46 infant deaths per 1,000 to 9.06 deaths in 2022, per the report.
  • Mortality rates increased for two of the 10 leading causes of death: maternal complications, such as preterm delivery, and bacterial sepsis, caused by the body’s extreme response to an infection.

HHS Information Blocking Rule Penalties: In 2020, when the U.S. Department of Health and Human Services (HHS) published its Final Rule to implement the information blocking prohibitions of the 21st Century Cures Act, HHS left healthcare providers wondering what consequences they may face for violations of the information blocking rules. Over three years later, on November 1, 2023, HHS took a major step toward establishing such consequences by publishing its Proposed Rule: “21st Century Cures Act: Establishment of Disincentives for Health Care Providers That Have Committed Information Blocking” (the Proposed Rule). The Proposed Rule would allow the HHS Office of Inspector General (OIG) to conduct investigations, make determinations regarding information blocking claims and refer violating healthcare providers to the Centers for Medicare & Medicaid Services (CMS) to be subject to the disincentives:

  • Hospitals.Eligible hospitals or critical access is a payment reduction could lose 75% of the annual market basket increase, while CAHs would see a payment reduction from 101% of reasonable costs to 100% of reasonable costs. HHS estimates that disincentives would range widely from roughly $30,000 to $2.4 million across eligible hospitals, with a median disincentive of $394,353.
  • Clinicians. Eligible clinicians or groups would not be a “meaningful user of certified EHR technology” in a performance period, resulting in a zero score in the applicable MIPS performance category (often a quarter of an entire MIPS score). In this category, HHS estimates a median individual disincentive of $696 but projects disincentives would grow to over $100,000 for large groups of clinicians.
  • Accountable Care Organizations (ACOs).Under the Medicare Shared Savings Program (MSSP), a healthcare provider that is an ACO, ACO participant, or ACO provider or supplier would be deemed ineligible to participate in the program for at least one year.

Bass Berry and Sims November 1, 2023 HHS Proposes Rule to Establish Disincentives for Healthcare Providers That Engage in Information Blocking | Bass, Berry & Sims PLC (

Federal Reserve Monetary Policy: At its meeting last Wednesday, the Federal Reserve kept its target interest rate unchanged (5.25-5.5%) acknowledging strong growth over the last few months and not ruling out another rate hike at its December meeting..

FDA Communications Guidance: The FDA has released revised draft guidance  on communicating with healthcare professionals (HCPs) about unapproved uses of approved drugs and devices. Once it’s finalized, the document will reflect FDA’s stance on how companies can communicate scientific information to clinicians regarding unapproved uses of products already on the market. In the guidance, “scientific information” refers to reprints; clinical reference sources including practice guidelines, reference texts, or independent clinical practice resources; and company presentations of information from reprints.

Department of Labor Jobs Reports: Highlights:

  • S. labor productivity growth jumped by a 4.7% annualized rate in the third quarter– the fastest since 2003 following a 3.6% rise in the second quarter. Compensation costs for civilian workers increased 1.1%, seasonally adjusted, for the 3-month period ending in September 2023 and4.3% for the 12-month period ending in September 2023.
  • Among private industry occupational groups, compensation cost increases for the 12-month period ending in September 2023 ranged from 3.9% for production, transportation, and material moving occupations to 4.5% for service occupations and ranged from 3.7% for manufacturing to 4.9% for both education and health services.
  • Health care added 58,000 jobs in October, in line with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+32,000), hospitals (+18,000), and nursing and residential care facilities (+8,000)

HRSA 340B Policy: Hospitals participating in the drug pricing program now must register offsite clinics with HRSA and list them on Medicare cost reports to qualify for 340B, the agency announced in a Federal Register notice last Thursday. This reverses a 2020 HRSA policy that aimed to streamline 340B certifications during the height of the COVID-19 pandemic.