Shylock Hospitals Exposed Colluding with Insurers

Charity Hospital Accountability Non-Profit Taxes

Marble Falls       We’ve done study after study of nonprofit hospitals, particularly on the question of their charitable status.  Benefiting from a tax-exemption, they are required to be charitable.  A condition of the amendments upon the passage of the Affordable Care Act more than a decade ago insisted that if they were not significantly and demonstrably charitable, they could lose their tax-exempt status.  The IRS was tasked to police this issue, but its performance has been lackluster. In recent years, the understaffing of their tax-exempt office could be blamed on the Congressional pique over the rich paying taxes and the allegation that some of their projects didn’t receive exempt status quickly enough during the Tea Party rage.  The additional funding under the Biden administration has not noticeably improved their performance to date.

All of which is to say that a recent piece in the Wall Street Journal caught my eye for a host of reasons.  First, it was another nonprofit hospital profit scrounging outrage, this time from the NewYork-Presbyterian chain.  Secondly, the story was almost a point-by-point case study in why health care is so costly, despite many Biden reforms, because of the behind-the-scenes collusion of insurers and hospitals arriving at anti-consumer, monopolistic agreements.  Thirdly, because if involved a union, SEIU’s 32BJ, whose building and impressive health care facilities in New York City for their membership, I’ve actually toured, and, finally, because the article quotes Manny Pastreich, the president of 32BJ, who I’ve literally known since he was a baby.

The actual story is simple.  The 32BJ health fund covers over 200,000 members and spends $1.5 billion a year covering its members and their families.  Like any plan of this size and scale, they contract with an insurer as a plan administrator to handle claims and payments.  Negotiating with Aetna as its preferred provider, to their chagrin, at the last minute they found that New York-Presbyterian was demanding that the fund pay them $25 million in order to exclude them from the network.  It turns out that the hospital chain had negotiated a contract with Aetna that extracted this exit penalty.  The terms of their contract are of course confidential, and they refuse comment.  They seem to have manufactured a claim that 32BJ owed them this money for unpaid emergency coverages, but they had never billed the fund and still have not substantiated the claim.  By the way, 32BJ had paid them $22.5 million in 2023 already for emergency room care for its members.  Needless to say, the whole thing stinks to the heavens and screams scam.

As the Journal reports, this isn’t unusual either,

Big, high-profile hospital systems can command premium rates and favorable terms in negotiations with private insurers, and sometimes deploy bare-knuckle tactics to get what they want.  Among hospitals’ demands can be guarantees that they will be included in all of an insurer’s networks, even if a client doesn’t want them.  The contract terms can make it hard for clients – typically employers and unions – to exclude pricey systems or steer patients to lower-priced hospitals.  They end up living with the conditions in the contracts, which are typically secret, and paying prices that are often double or more what the government spends for the same medical services.

The whole thing is outrageous and all kinds of government agencies from Justice to the FTC to the Consumer Finance Protection Bureau should be all over this article and this problem like white on rice.  NewYork-Presbyterian’s greedy effort to skim millions from doormen, cleaners, security guards, airport workers, and similar service workers is something they might should have given better consideration before embarking on this scam.  32BJ is not a local union to trifle with, and good on Pastreich and his team for not shrugging off this scandal and making sure it sees the light of day.  Taking away NewYork-Presbyterian’s tax-exempt status would be a good start, but all of us have to hope this will be the beginning of big-time actions to break these hospital-insurer cartels and serve the real interests of consumer-patients.