Last week’s column on Indiana’s hospital monopolies generated 10 times the emails of any other column I’ve penned over the last decade. Hoosier taxpayers are interested in understanding who caused this problem and how we can fix it.
Awareness of this issue is important because Indiana’s not-for-profit hospital industry surely earned a billion dollars in interest on their accumulated profits last year, through their hedge fund and money market investments. That kind of money should attract thorough scrutiny of my work.
This invites the question of who we should blame. If you are looking to pin the fault on the legislature, I must disappoint you. It appears that this problem really grew in the wake of the Great Recession and healthcare reform. Even the strongest supporters of the Affordable Care Act (ACA or Obamacare), anticipated significant disruptions in healthcare markets. Many states added tools for hospitals to survive the transition. States also allowed much more aggressive hospital mergers than federal merger guidelines allowed. Indiana was ground zero for these problems.
By 2012 or 2013, it was clear the ACA was not as disruptive as expected, but it left not-for-profit hospitals in Indiana awakened to a host of new tools to prevent competition. They used these tools skillfully, amassing huge profits before almost anyone noticed. The industry kept a tight lid on their windfall profits, spending part of them to convince legislators that we needed less, not more competition in healthcare markets. This diversion and lack of transparency has meant few of us figured out there was a crisis brewing. Of course, now we need to act, but what can and should we do?
First, we have to level the playing field between for-profit and not-for-profit hospitals. The biggest issue is eliminating barriers to market competition. We need to end the Certificate of Need legislation, outlaw non-compete clauses in practitioner contracts, prevent hospitals from limiting admitting privileges to favored physicians, and force hospitals to publish transparent pricing data.
Second, we need to tax not-for-profit hospitals like their for-profit competitors. We should all recognize that these shocking profits come from just three groups who pay healthcare expenses. These are Indiana’s state and local governments (including schools), Hoosier businesses and Hoosier families. Without equal tax liabilities, we will see no real competition.
Finally, we are going to have to separate ownership control of the accrued profits from these hospital boards. The reason is that the mere existence of these immense war chests represents a classic barrier to competition.
I am not sure where these profits could go, but I have heard some intriguing ideas. Maybe they should fund a large, statewide investment fund. This is an idea I especially like. Perhaps we could end the endless whining by hospitals about a nursing shortage by asking that they permanently endow every nursing school in the state.
These three steps are not some sweeping new government intrusion into free markets. On the contrary, they simply level the playing field, removing the government-created advantage not-for-profit hospitals have so successfully exploited.