The Nonprofit Scam


It is so great to be a nonprofit hospital. First, you get to say you are a nonprofit, which gives off the connotation that you are not making money.   It rolls off the lips of the hospital CEOs so easily because they are doing so much good.  Heck, it’s kind of like a charity, right?  Don’t believe it.  In a Washington Post piece, it as found that:

 “The value of tax breaks for nonprofit hospitals has doubled over the course of the past decade, new research shows.” In 2011, hospitals received $24.6 billion in “Federal, state and local” tax exemptions, compared to $12.6 billion in 2002.

Yes, that is billions of dollars, folks.  Now get this, Modern Healthcare reports that despite the doubling in the value of tax breaks, the majority “of those funds aren’t being spent on improving community health,” according to the study recently published online in the journal Health Affairs. The study found that in 2011, “tax-exempt hospitals…provided $62.4 billion in community benefits,” only eight percent of which “supported ways to improve community health.” The remaining 92 percent “encompassed charity care for indigent patients, Medicaid payment shortfalls, research and training.”

In other words, they are getting paid for their charity care and Medicaid care. I am confused, how do you define charity again?  And the Medicaid patients are the same ones they cry about when stating they are supposedly losing money.  If they are losing so much money, why are the CEOs paid ridiculous salaries?  Why are there cranes at every one of these hospitals working on new building projects?  This is why hospitals support Medicaid expansion. They are raking it in all under the guise of nonprofit.

Douglas Farrago MD

Douglas Farrago MD is a full-time practicing family doc in Forest, Va. He started Forest Direct Primary Care where he takes no insurance and bills patients a monthly fee. He is board certified in the specialty of Family Practice. He is the inventor of a product called the Knee Saver which is currently in the Baseball Hall of Fame. The Knee Saver and its knock-offs are worn by many major league baseball catchers. He is also the inventor of the CryoHelmet used by athletes for head injuries as well as migraine sufferers. Dr. Farrago is the author of four books, two of which are the top two most popular DPC books. From 2001 – 2011, Dr. Farrago was the editor and creator of the Placebo Journal which ran for 10 full years. Described as the Mad Magazine for doctors, he and the Placebo Journal were featured in the Washington Post, US News and World Report, the AP, and the NY Times. Dr. Farrago is also the editor of the blog Authentic Medicine which was born out of concern about where the direction of healthcare is heading and the belief that the wrong people are in charge. This blog has been going daily for more than 15 years Article about Dr. Farrago in Doximity Email Dr. Farrago – [email protected] 

  5 comments for “The Nonprofit Scam

  1. Ben Van Raalte
    June 19, 2015 at 3:27 pm

    Remember Nonprofit means all the leftover money is paid out as bonuses to the administrators.
    Instead of paying stockholders they can just keep the money. Cant have a profit on paper anyway.
    And that is what is being done, dont kid yourself. That is why the greed has increased, it is their money.
    And unlike you or I starting a business the administrators do not have their capital invested.

    Lastly, nonprofits qualify for a unique loophole. DEFERRED COMPENSATION. My 401k requires aI put the same percentage for all employees as me, and I am limited with a modest ceiling. Nonprofits are allowed to put away millions as deferred compensation. YES MILLIONS. And not have to compensate other employees with the same percentage.

    They also now qualify with their millions to have their school loans forgiven by the government because they WORK emphasis added for a nonprofit organization. That was in the fine print (dont read it just pass it) of Obamacare

  2. Perry
    June 19, 2015 at 10:59 am

    I think I’ll apply for non-profit status myself….

  3. Bill Ameen MD
    June 19, 2015 at 9:29 am

    Years ago my office manager tried unsuccessfully to talk my CPA into making our practice a “non-profit,” because, as she helpfully explained, “We’re not making any profit.” It didn’t take a prophet to see where that was headed! That said, there should be a limit on how much the officers of a non-profit, whether a hospital or Blue Cross, can be paid. But that’ll never happen, even if good ol’ Bernie Sanders becomes President!

  4. Seneca
    June 19, 2015 at 8:40 am

    The public really, really does not get this. Doctors continue to be demonized–read the comments section at about Krauthammer’s recent article on why doctors are quitting to get a flavor of what the general public thinks. Multiple sources (most recently Becker’s Hospital Review) cite a 25% administrative overhead cost at US hospitals. Rough math means $6 billion in tax exemptions alone for fat cats who often make significantly more money with less labor or education than their physician hirelings. Hospital administrators are de facto government employees since a huge majority of their money comes from Medicare and Medicaid. Washington should cap their salary at a GS-15 level and use the rest of the money to run the hospital. I won’t hold my breath.

    • Steve O'
      June 20, 2015 at 9:12 am

      -Nice words, Seneca. It’s hard to run an effective pogrom without a scapegoat. There is vast profit to be made by crowding into the money flow to grab one’s share. The doo-dad hawkers and the management touts, reformers and shame-based merchants, regulators and regular-old grifters are jostling to get their buckets under the money spigot, which flows several billion dollars a day.
      -It is the same madhouse that typified American business in the 1920’s, when whatever stock you bought went up, up, up! When the old-fashioned question, “What the hell does your business actually DO?” became trés declassé. “Dear fellow, what do we DO? What an unmodern concept! What we DO is make money!! THAT is the definition of business.” Those who do are overall-clad, blue-collar and swarthy – the production line, the factory floor! “Those are the people who “DO” things – don’t get downwind!”
      -“Doing” goes on in the windowless building – “earning” and “profiting” in the Corporate office. And the cold wind of Reality blows down Wall Street every few decades. Sooner or later, people will only buy that which is useful. How harsh! How selfish!!
      -Yes, let the doctors and nurses do what they do, but like junkies and whores, let’s move them to a particular district where decent people don’t have to watch them ply their trade. “What they “DO” is perhaps necessary or desirable to some element of the population – but let’s not have to see it everyday on our way to work!”
      That is the mindset. It does not bode well for the future.

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