The Daily - How Nonprofit Hospitals Put Profits Over Patients

Episode Date: January 25, 2023

Nonprofit hospitals — which make up around half of hospitals in the United States — were founded to help the poor.But a Times investigation has revealed that many have deviated from those charitable roots, behaving like for-profit companies, sometimes to the detriment of the health of patients.Guest: Jessica Silver-Greenberg, an investigative business reporter for The New York Times.Background reading: With the help of a consulting firm, the Providence hospital system trained staff members to wring money out of patients, even those eligible for free care.Dozens of doctors have said that this New York nonprofit hospital pressured them to give preferential treatment to donors, trustees and their families.Bon Secours Mercy Health, a major nonprofit health system, used a poor neighborhood to tap into a lucrative federal drug program.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. 

From The New York Times, I'm Sabrina Tavernisi, and this is The Daily. Today, nonprofit hospitals were founded to help the poor. But a Times investigation has found that many are abandoning those patients in pursuit of profits. My colleague, Jessica Silver-Greenberg, on what that investigation found. It's Wednesday, January 25th. So, Jessica, tell me about this reporting you've been doing on hospitals and this patient you met, Alexandra Nyfors. Okay. So, Alexandra Nyfors is a woman in her 60s, and she lives in Everett, Washington, which is about 30 miles away from Seattle. Hello?

Hi, Alexandra. Hi there. Hi. I spent a fair amount of time talking to her over the course of many months last year because she had this truly harrowing medical emergency. In October of 2021, she is starting to feel pretty crummy. I've had some sort of unidentifiable digestive system infection. She was having a lot of stomach pain. She was feeling dizzy. I know I couldn't get dressed and I couldn't stand up. And eventually, Alexandra is getting so sick that her roommate is really worried and calls an ambulance to take her to the hospital.

And Alexandra told me that at this point, she was really out of it. But still, on some level, she's aware that this trip could cost her a lot of money. You can't go to an emergency room anymore without it being thousands of dollars. And I knew that. But at that point, I just didn't care. I was so sick. This is a woman who's very used to living on a very tight income. Her only income is Social Security disability, which is about $1,700 a month, every month. I have constant problems with supporting my medications. I'm disabled and I'm also diabetic. And so there is a lot of expensive meds on my to-be-bought list.

meds on my to-be-bought list. And so when she gets to the nearby hospital, she's waiting alone and scared in the emergency department. And she's eventually seen by doctors who tell her that she's in pretty bad shape. Turns out that she'd been so severely dehydrated that her kidneys had failed. Wow. And so she's told by the emergency department staff that she's going to be admitted and is probably going to have to stay for a while. I was worried about my cat. Oh, what's your cat's name? Stubby. Stubby?

Yeah. Yeah, he's kind of stubby. Anyway, I was very alone, and I was, of course, afraid I was dying. So she's worried about her health, obviously, and she's worried about how much whatever treatment she needs are going to cost. And so she described to me that every time a nurse or a doctor or anyone at the hospital had to do anything, every single procedure she got, all she's seeing are dollar signs. grand and a half. And I knew it was going to be a huge bill. I knew it was going to be enormous. I just figured, well, I'll be paying on this for the rest of my life.

So Alexander eventually gets home to Stubby. And for a couple of weeks, she doesn't hear anything from the hospital. At first, waiting for the bill was like waiting for the other shoe to drop. At first, waiting for the bill was like waiting for the other shoe to drop. And the bill arrives. And while her insurance covered the bulk of her care, there was still a sizable portion, sizable for Alexandra at least, that was left over. It was $1,950, which of course I didn't have. So more than she's taking in for the month, right? A lot.

Exactly. More than $200 more than she takes in every month. You know, at first I was just overwhelmed, like, how am I going to pay this? I don't have $2,000. So she goes on the hospital's website to see whether there are any options for her. And what she sees are two choices, pay the bill in full or enter into a payment plan. And that was $162.50 a month. And I was like, oh, man. Well, it means no groceries, but, you know, I can pay $160, $250 a month. So I've made the first payment. And so she starts buying fewer groceries.

You know, she's going without heat. starts buying fewer groceries. You know, she's going without heat. She starts rationing her medications, skipping days, splitting her medication in two to make it last longer. These are all huge sacrifices for her, all in the service of paying this bill. And did she consider not paying it?

It's a really good question, and something that I asked her. Did you think at all about just ignoring the bill? No. And why not? They took really good care of me. And I was alive. She said whatever it takes,

she is going to make good on this bill. Wow. In return for the care. Okay, so this bill effectively is the catastrophe that Alexandra was worried about. Yes, absolutely. But here's the thing. Alexandra should never have had to pay the bill in the first place. Never had to pay the bill? Like, how? What does that even mean?

So, by law, the hospital that Alexandra went to is supposed to provide free care to Alexandra and any other patient who is a low-income patient. That hospital is part of a massive health system called Providence. And Providence was started about 100 years ago by a group of nuns in Washington state. And it's what is called a not-for-profit hospital. I see the mission as the core or the heart of our organization. Providence's mission statement, for example, is that the hospital should be, quote, steadfast in serving all. Especially those who are poor and vulnerable. The thing about not-for-profit hospitals is that they have this special deal with the IRS.

So the IRS gives them very generous tax breaks. And in return, these hospitals are supposed to do a number of things to benefit their communities, which can include giving free care to people who can't pay, people just like Alexandra. And what kind of tax breaks are we talking about when it comes to Providence? Like, how big? Very big. So in the case of Providence, about a billion dollars in tax breaks every year. So a lot of money. It's a lot of money. And their revenues, Providence's revenues, are $27 billion a year. The CEO in 2020 made $10 million. And that's not all. You know, the chain is also sitting on $10 billion of cash, which it invests Wall Street style alongside private equity firms and other, you know,

big deal investors. But Jess, this just doesn't sound like a nonprofit at all, right? Wall Street, cash, war chests, like, what is this? I mean, you're right. It's pretty wild. Like, welcome to the world of nonprofit hospitals. nonprofit hospitals. So my colleagues Katie Thomas, Sarah Cliff, and Rebecca Robbins and I spent basically a year looking into them. There are 5,000 of them all over America. They make up about half the hospitals in the country. And they're unlike any other nonprofits I've looked at. They have the kind of cash that you might expect a company like Walmart or Target or another massive for-profit operation to have.

And I think, Sabrina, your question about them seeming more like for-profit companies than nonprofit is a good one. I mean, Providence, for example, does run itself like a for-profit business in many ways. So the program that Alexandra got caught up in was specifically designed to maximize the amount of money the hospital system was bringing in from some of its poorest patients. So tell me about that program. So the program starts around 2018. And at the time, executives at Providence were looking for ways to save money. The hospital system had recently merged with another nonprofit hospital, and integrating these two massive systems was proving expensive. And Providence was also spending hundreds of millions of dollars every

year providing free care. So they hired McKinsey & Company, the consulting firm, to come up with a plan to get patients to fork over money. And they called it RevUp, as in revenue up. Oh boy. Okay. The centerpiece of this program were a series of scripts, like theatrical scripts, that outlined in this play exactly how employees should try to get money from patients, even those who were supposed to receive free care. And these documents were distributed to anyone at the hospital who might interact with patients and talk to them about payment. So in one training document, for example, the employees were told, do not accept the first no. And then staff are led through a series of questions to ask patients. The first was, how would you like to pay that today? If that question didn't work, employees were told to ask for half the balance. If that didn't work, staff could offer to set up a payment plan like the kind that Alexandra went on. from this collection program is any way of screening patients to determine whether they

should qualify for free care. So they don't even know if the person they're talking to would qualify for free care. That's right. So that is quite a hard sell of give me your credit card, basically. Yes. And there were things that weren't included in those training scripts that also contributed to what became really a boiler room kind of atmosphere within some of Providence's hospitals. It became so kind of built in to the culture at Providence that on one Halloween at one of Providence's hospitals, an employee dressed up as a wrestler named Rev Up Ricky. Oh, God. And another costume during this Halloween

featured a giant cardboard dollar sign that had Howe printed on it, which was a reference to the way that staff were supposed to ask patients how, not whether, they would like to pay. Oh. And how did employees feel about this? I mean, this is a very potentially deeply uncomfortable thing to ask patients. A lot of the employees that I spoke to, some of whom had no more money than the patients they were hounding, were really unsettled by this because they were also aware of just how rich this hospital system is. And so one woman who worked in the emergency department said that really the tactics that she was told to use

struck her as completely predatory. She was told to approach patients almost as soon as doctors had finished examining them. So like doctor leaves the room and she walks in and she crouches at their bedside and asks for money. And she was required to put in patients' medical charts that she had repeatedly asked for payments. Because if that wasn't in there and her bosses caught wind of it, she would suffer the consequences. She would be called out. And it was in their medical charts? That's crazy.

It was written into their medical charts. Yeah. I mean, it's particularly jarring, right? Because of the origin and mission of Providence, helping poor people, providing care for poor people. That's right. So what do executives at Providence say about RevUp and the company culture? Like, how do they explain this? Well, we were able to get on the phone with Providence's chief financial officer, who did say that our findings were concerning. And he emphasized that the hospital system wants to get it right, to do well by their patients. But Providence also pretty emphatically defended

its practices. And they pointed out to us that in Washington state, for example, Providence provides more free health care than any other hospital. But the thing is, Providence was just one of the hospital systems we looked into that had strayed far from its charitable roots and was acting more like a for-profit company. And sometimes that kind of behavior had really serious consequences for the health of patients. We'll be right back. So, Jessica, you said that Providence was just one example of the for-profit behavior you found while investigating not-for-profit hospitals.

What else did you find in your reporting? Well, one of the most shocking examples of this kind of rapacious for-profit behavior came from another giant not-for-profit health system called Bon Secours. called Bon Secours. And Bon Secours found a way to just mint hundreds of millions of dollars off a tiny poor hospital in Virginia called Richmond Community. Okay. How did they do that? Well, first, let me tell you a little bit about Richmond Community. It was founded in the 1900s by black doctors who weren't allowed to work at the white hospitals across town. And it was a modest building and ringed by public housing projects. And it didn't have all the services at larger hospitals, but it did have specialists in cancer, heart, and lung disease. And people were proud of this little hospital that could. It was a place where Black patients

could be treated by Black doctors, and there was a sense of pride both in its history and its mission. But over the years, for a bunch of reasons, it got harder and harder for independent institutions like community to stay afloat. the doctors who owned it sold it to Bon Secours. And executives at Bon Secours eventually realized they could use this poor hospital to tap into a very lucrative federal drug program. The program allows hospitals like Community that serve low-income patients to buy prescription drugs at steep, steep discounts and then charge insurers full price for those same drugs and pocket the difference. So seems reasonable. Poor neighborhoods

should have discounts on drugs. Right. That was the intention of the program, which is called 340B. The theory behind this program was that nonprofit hospitals would invest the savings, that windfall, into their communities. Okay. But after Bon Secours bought Richmond Community, it figured out how to use this program to supercharge its profits. What Bon Secours did is they began building clinics in wealthier neighborhoods where patients had private insurance. And each of these new locations, even though they were far away from Richmond community and not serving poor patients, were still allowed to take advantage of the same drug discounts. So Bon Secours just basically franchises this program to a whole bunch of different locations, even though those communities weren't meant to receive the discount. That's exactly right. And on paper, these new locations were just extensions of Richmond Community Hospital. So how much money does that make Bonce Course? And where does it go?

So we know that Richmond Community Hospital generated about $100 million a year through this program. Wow. A lot. Yes, a lot. The vast majority of that revenue from our reporting is thanks to this program. But then, to get back to your question, where did this money go? I mean, that is one of the things that we started to investigate,

and that's a really big question. We know that executives at Bon Secours are paid like for-profit executives, similar to Providence. The CEO at Bon Secours made $6 million in 2020, and we also know from our reporting that Bon Secours clinics in wealthy neighborhoods have really great amenities,

marble fountains and golf carts to shuttle patients from their cars. Meanwhile, Bon Secours was really stripping services from Richmond Community Hospital. In 2017, it closed the ICU. And one of the doctors we spoke to, whose family was involved in the founding of Richmond Community, said that closing the ICU really took the heart out of the hospital. Because once the ICU was closed, the lung specialists and other specialists like cardiologists had nowhere to treat seriously ill patients. So you start to see this attrition, this exodus of specialists, you know, the lung specialists leave and then the cardiologists follow them. And Bon Secours does not replace these doctors. So Richmond community really becomes a shell of itself. Okay, so this is all pretty incredible, right? system, Bon Secours, making more and more money off the back of this smaller hospital, Richmond Community, even as it stripped that same hospital of its services. So what do the doctors

and the people at Richmond Community Hospital have to say about this? Well, so one doctor we interviewed who worked in Richmond Community's emergency department until 2018, he put it pretty bluntly. He said Bon Secours was basically laundering money through this poor hospital to its wealthy outposts. And he was outraged about it. And he said it was all about profits. At this nonprofit hospital. That's right. And how does Bon Secours justify this?

What do they say to the people inside Richmond Community Hospital who need to go to the ICU and can't? protested these cuts and to patients was that if patients in the East End needed services that Richmond Community Hospital doesn't offer, they can always go to other hospitals in the Bon Secours system. But there's a problem with that, which is those hospitals are miles away, and they're not easily reachable by public transit for the people who live near Richmond Community Hospital. And a lot of those people don't have cars. And in practice, we found cases where the fact that Richmond Community Hospital was so diminished actually harmed patients, really harmed them. I mean, a case that has stuck with me throughout this reporting that I was really pretty haunted by

was the case of a man named Norman Odie. So this summer, he was rushed by ambulance to Richmond Community Hospital. He was in his 60s and was doubled over in pain, and he was babbling at this point pretty incoherently. And blood tests suggested septic shock, which is an emergency that requires resources and the expertise of an intensive care unit to treat. But Richmond, as we've said, had closed its ICU in 2017, so there was no ICU for him to

go to. And it took several hours for him to be transported to another hospital. And he deteriorated on the way there, and he later died of sepsis. God. And two people who cared for Mr. Odie said the delay had most likely contributed to his death. Wow, that is an indictment of the decisions that the hospital system made. That's right.

So this is the kind of human toll that we saw, where in theory, what Bon Secours is saying makes perfect sense. But the mechanics of it break down, as we saw. So Jessica, just stepping back here for a second, your reporting has shown that many nonprofit hospitals, including some of the biggest hospital systems in the country, are really effectively operating as for-profit companies. But they're still getting these huge and lucrative tax breaks and subsidies from the government.

So I guess my question for you is, how did we get here? I mean, why have nonprofit hospitals gone in this direction? So when we talk to nonprofit hospital executives, they say that they're in a pretty tough spot. they say that they're in a pretty tough spot. They're competing, you know, with a whole host of rivals, not just other not-for-profit hospitals, but also for-profit hospitals. And in order to compete and live up to their mission, they need to be strong financial stewards. The phrase that we heard again and again when we spoke to executives is the phrase, no margin, no mission. The idea is that if you're not in a strong financial position, if you don't have a lot of cash, you won't survive and you won't be able to fulfill your mission if you don't

exist, right? So executives justify this kind of profit-seeking behavior because they say, look, we want to expand. We want to provide more care for more people. And in order to do that, we're competing for investors. We're trying to make sure that we can borrow money at low interest rates so that we can expand less expensively. But as your reporting has shown us, there are real consequences to that behavior. And yet they're still receiving these tax benefits. Why? We found that much of the problem lies with the IRS. So the IRS is not really policing these hospitals to see whether or not they are following the rules. And the problem

is that the rules themselves that hospitals have to follow to justify their tax exemptions are pretty squishy. So the IRS now allows hospitals to provide a broad range of very loosely defined benefits to justify their tax breaks. And some hospitals have seized upon this new leeway and argued that things like employees' salaries counted towards the IRS requirement or building a shiny new surgical center in a suburb where all the patients are pretty wealthy, that also counts towards fulfilling this, again, pretty squishy, loosely defined community benefit. Jess, is any of what these hospitals were doing illegal? For the most part, no. With Providence, the attorney general in Washington state

actually sued the hospital system in February of last year and did argue that Providence's collection practices were in violation of the state law, in part because they were using debt collectors to pursue, and the scale of this is pretty stunning, about 55,000 patient accounts that the state attorney general argued should never have been sent to collections. And the lawsuit said that Providence wrongly claimed that those patients owed more than $73 million. But Providence fervently denies that anything they did was illegal. So that's the closest that we came to kind of allegations of illegal behavior. And Jess, do we have a sense of what the decision might be in that lawsuit? We don't. We have some clues as to how it might go, although I could never predict how a lawsuit of any kind is going to go. But Providence has already said it will stop using debt collectors to pursue money from low-income patients

who should qualify for free care in Washington state. So that is a move. And actually, shortly after our story on Providence ran, the hospital system said it would refund payments that more than 700 low-income patients made. And they said that those people had been wrongly charged for medical care that should have been free. And what about Alexandra? Did she get her money back? Well, so Alexandra's story has a happy-ish ending. She does get her money back, but this whole ordeal with Providence has really stuck with her. You know, when I asked her what she thinks of Providence now and how she

might feel about having to go back to the hospital if she gets sick with anything else, she said she's afraid of the hospital. You know, in the part of Washington state where she lives, Providence is really the only game in town. So if she does have to go back to the hospital, she's worried that Providence will refuse to treat her because of how vocal she has been about what happened to her. she has been about what happened to her. And I did try to reassure her that if Providence were to deny her life-saving care, that would likely be illegal. But honestly, I'm not sure that did much to assuage her concerns.

Because, you know, she's still sick. And the way she sees it, this hospital system took advantage of her once. Why wouldn't they do it again? Jess, thank you. Thank you. After the Times investigation ran, Richmond's mayor called for a federal investigation into Bon Secours,

while the hospital system pledged to reinvest in the neighborhood around Richmond Community Hospital, including adding back specialties like cardiology and pulmonary care. We'll be right back. Here's what else you need to know today. Here's what else you need to know today. On Tuesday, classified documents were found in the home of former Vice President Mike Pence, raising more questions about how classified materials are handled at the top levels of government. The Department of Justice is currently investigating both Donald Trump and Joe Biden for classified materials found in their homes.

Donald Trump and Joe Biden for classified materials found in their homes. The documents were, quote, inadvertently boxed and transported to Pence's home in Indiana at the end of the Trump administration. Aides found them and notified the National Archives. They said Pence was unaware of their existence. And the Times reports that the Biden administration plans to send as many as 50 Abrams tanks to Ukraine, a major new step in arming Kiev at a critical phase of the war.

The administration had previously decided against sending the tanks, but reversed course, apparently in an effort to get Germany to send its tanks. German officials privately said that they would only send their Leopard tanks if the U.S. agreed to send the Abrams. On Tuesday night, German news outlets were reporting that German Chancellor Olaf Scholz had already decided to send them.

He will address Parliament on Wednesday. Today's episode was produced by Asta Chaturvedi and Will Reed. Thank you. and was engineered by Chris Wood. Special thanks to Katie Thomas. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for The Daily. I'm Sabrina Tavernisi. See you tomorrow.