‘Nonprofit’ hospitals and the $987 cortisone shot
June 2, 2014
OCPA research fellow Vance Fried, the Riata Professor of Entrepreneurship at Oklahoma State University, has written previously about “nonprofit” universities which are in fact wealthy and highly profitable. Now Professor Fried — after being charged $987 for a cortisone shot — takes to the pages of Investor’s Business Daily to discuss “nonprofit” health care providers.
“Surprisingly,” he writes, “the industries that have the most rampant price-inflation problems — health care and higher education — are dominated by nonprofit providers. Could it be that they are just as profit-driven as big, for-profit corporations? It certainly seems so. While legally organized and taxed as nonprofits, many health care and higher education providers are hardly selfless, and as their prices have dramatically increased, so have their profits.”
It is often assumed that “nonprofit” institutions don’t make a profit, Fried writes. But that’s not necessarily the case.
For example, the large nonprofit hospitals in Oklahoma generally charge two to three times as much as the doctor-owned, for-profit surgery centers. That’s for the same procedure performed by the same surgeon. What does the “nonprofit” hospital do with all that extra money? It certainly doesn’t subsidize a lot of indigent health care. Expenses for charity care and bad debts amount to at most only about 6% of the average hospital’s revenues, and some estimates peg it lower than that.
Fried has some excellent recommendations for students, patients, policymakers, and those entrusted with the management of nonprofits. I encourage you read his entire article, “Sectors Dominated By Nonprofits Have Highest Prices.”
“Just because hospitals or colleges say they are ‘nonprofit’ doesn’t mean they are,” Fried writes. “Indeed, they may be anything but.”