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How are we rewarding hospitals pursuing charitable missions?

Posted Dec 20 2008 6:45pm

In a December 12 article, The Wall Street Journal highlights Mount Sinai Hospital, located in one of the toughest neighborhoods of Chicago’s West Side, as it pursues its charitable mission amidst a precarious financial situation. The hospital is a great example of what “healthcare for all” really means, providing “all patients, rich or poor, the same standards of care.”

The financial numbers are disturbing. “While some large nonprofit hospitals have amassed billions of dollars in reserves, Mount Sinai’s days of cash on hand – a common gauge of a hospital’s solvency – is sometimes measured in hours,” states the article.

With 72 percent of its patients uninsured or covered by Medicaid, and just 10 percent possessing commercial health insurance – the only type that gives the hospital a profit margin – Mount Sinai’s predicament worsened two years ago when a neighboring hospital turned into a long term care facility, creating a surge in admissions at Mount Sinai from 35,000 to 58,000.

Expenditures continue to gobble up revenues. Mount Sinai has delayed investments in new equipment, struggled to replace stolen equipment, and given up on pursuing non-paying patients.

Mount Sinai struggles to maintain its commitment to the community it serves. Programs centering on the elimination of gang violence, smoking cessation, and the reduction of teen pregnancies teeter at the brink of feasibility due to the overwhelming lack of funds. Operating in a tenuous financial situation, the hospital still tries to improve the health of its community – its top priority. “We can’t be part of this community if we’re not trying to change people’s lives and make it better,” says Alan H. Channing, Mount Sinai’s chief executive.

“While a number of nonprofit hospitals have grown into profit machines in recent years, some, like Mount Sinai, have stuck to their charitable mission but struggled financially. These institutions are usually located in inner cities and not anchored to big nonprofit systems, nor can they rely on government support the way county or state hospitals can.

In return for exemption from local, state and federal taxes, nonprofit hospitals are expected to provide benefits to their community, including charity care for the poor. Surplus revenues are supposed to be channeled back into operations.”

The mission is a valuable one. However, “because of the way it is designed, Medicaid makes higher payments to one of Chicago’s richest nonprofit hospitals, University of Chicago Hospitals, than it does to Mount Sinai.” Two hospitals trying to affect their communities equally, yet one is financially rewarded at a higher level because of its geography and the population it serves.

Are we rewarding the wrong thing?

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