November 19, 2007
By Professor Michael Myers/ the Elderlaw Forum/Senior Legal Helpline/University of South Dakota School of Law
“Avera/Sanford donations: Is it appropriate for tax-exempt hospital ‘charities’ to gift ‘patient money’ to the government; is it not an indirect tax on patients?”
Thoughtful citizens should reflect on the nature of this generosity and ask themselves: where does this money come from? And, is it appropriate for “charities” like Sanford and Avera to collect money from patients, to accept tax-exempt gifts, and then behave like private philanthropists and “donate patient money” to the government?
This type of behavior places in question whether these health systems, which have become the region’s largest and most profitable businesses, should continue to be treated as charities; whether they should pay taxes, because in effect they are indirectly taxing their patients to help support public institutions—in this case South Dakota State University? And as we know, Sanford has “donated” tens of millions of dollars to the University of South Dakota.
As a member of the University faculty, I am an indirect beneficiary of those gifts—and it could be argued that a person should not look a “gift horse” in the mouth. Nevertheless, in view of the growing health care cost crisis confronting our nation, such charitable conduct may be regarded as poor public policy and hypocritical. If South Dakotans wish to have better educational and research facilities, they should ask themselves whether it is better to have those costs borne by all citizens through our tax base, or should those costs be borne by those who become sick and injured?
Metaphorically, it is a little bit like you making a $1,000 donation to the Salvation Army, which then makes headlines by turning around and donating your $1,000 to the Cancer Society and portraying itself as a benefactor.
If Sanford and Avera are “charities” should they be gifting their monies to other “charities”—or to the State of South Dakota, which now takes on the role of a “charity”? If South Dakota wishes to support higher education should it not tax all of us, not just patients?
These donations reflect a flawed lack of accountability on the part of these billion-dollar health care systems: they are de facto private clubs: they have no shareholders and therefore are not accountable to investors; and they are not public institutions and therefore not accountable to the electorate. They operate in a “quasi-public- quasi-private” legal bubble. As one state supreme court observed, these nonprofit health care systems operate primarily for the benefit of their physicians and their executives, not for the public they profess to serve.
If they behave like for-profit corporations; compensate their employed physicians at $300,000 to $1 million annual salaries; pay their executives $150,000 to $500,000 salaries, and spend hundreds of millions on facilities that are duplicative, underutilized and improperly utilized--should they not be treated like for-profit corporations? In South Dakota should they not pay property tax and sales tax?
Since the state medical-industrial complex has the state legislature “wired” politically, should the people of this state initiate a referendum to circumvent a legislature that serves the interests of the medical/health system lobby rather than the citizens they are presumed to serve?
see “Utah County v. Intermountain Health Care,” inc.—
“because the ‘care of the sick’ has traditionally been an activity regarded as charitable in American law, and because decisions from other jurisdictions incorporate unexamined assumptions about the fundamental nature of hospital-based medical care, we deem it important to scrutinize the contemporary social and economic context of such care. We are convinced that traditional assumptions bear little relationship to the economics of the medical-industrial complex of today.” Nonprofit hospitals were traditionally treated as tax-exempt charitable institutions because, until late in the 19th century, they were true charities providing custodial care for those who were both sick and poor. The hospitals’ income was derived largely or entirely from voluntary charitable donations, not government subsidies, taxes, or patient fees.”
“the literature indicates two models of nonprofit hospitals and health care systems”—
(1) The “physicians’ cooperative” model describes nonprofit hospitals that operate primarily for the benefit of the participating physicians, and
(2) The “polycorporte enterprise” model describes the increasing number of nonprofit hospital chains. Here the power is largely in the hands of administrators, not physicians.
Is it not time to initiate civil discourse on this important issue?
[Note from Doug Wiken. First, Thanks to Prof. Myers for providing this text information related to his recent WNAX interview. Second, I made some changes in font, formating, spelling and grammar to better fit this blog format. I don't think any ideas were changed in my error-prone method however.]
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