As a former hospital system CEO, I know that hospitals and health system leaders face challenges and issues as tough as anywhere in America. That's why we feel it's so important to clarify some particularly misleading statements in the March 4 Time magazine article "Bitter Pill."
Let's start with the article's assertion that nonprofit hospitals should not be allowed to make a "profit." The fact is, all hospitals need a positive margin to help finance the facilities and equipment needed to keep pace with advances in care and meet the demands of our aging population.
Then there is the statement about nonprofit hospitals employing their "region's most richly compensated executives." Nowhere does the article mention the rigorous process prescribed by the Internal Revenue Service for setting executive compensation, or that an impartial panel of a hospital's board usually is charged with setting CEO compensation.
This board relies on benchmark data from similar organizations to determine the compensation for, what is in my view, one of the most difficult jobs imaginable — helping to improve your community's health, while navigating the often-conflicting priorities of the public, government, business and insurers. The value hospitals bring to the community goes beyond the care that they provide, and we must make sure others understand this important fact.
Finally, there's the article's criticism of hospitals for a lack of price transparency and an overreliance on the chargemaster as the "core document that is the basis of billions of dollars in health care bills." While hospitals by law are required to maintain a uniform set of charges, the fact is that the rates they charge to most patients are not reflected on the chargemaster.
Because nearly all of a hospital's payments are set either by government, which pays less than the cost of caring for patients, or through negotiations with private insurers, the vast majority of patients do not pay what is listed on the hospital bill. And that's why one in four hospitals operate in the red.
You and your organization deal with an extraordinary burden of government regulation, myriad insurance requirements and constant uncertainty about federal compensation. At the same time, you are under tremendous pressure to improve the quality and safety of care, play an ever-expanding role in community health and bend the cost curve. The good news is that you are making real progress in all these areas.
It's worth repeating: You have one of the most difficult jobs imaginable. I concur with the late Peter Drucker who observed that "even small health care institutions are complex, barely manageable places … large health care institutions may be the most complex organizations in human history."
America's hospitals represent all that is good about health care in this country — the very special people who take care of others day in and day out and who, by their very caring, make their communities stronger and healthier.
Rich Umbdenstock is president and CEO of the American Hospital Association.