Forbes’ annual list of the world's richest people just came out, and it includes 35 health care billionaires. Topping the list is Thomas Frist Jr., whose father founded HCA Healthcare. The Frist family has a net worth of exceeding $20 billion. They own 205 hospitals across the country.
Meanwhile, in our state we have been hearing a lot about the crisis in hospitals because of insufficient funding. Washington hospitals say they lost $2 billion in 2022. The Legislature is responding with a work-around that will pull in federal money to increase Medicaid payments. However, hospitals in our state were not hung out to dry during the height of the COVID-19 pandemic. In the first six months of the pandemic, hospitals and rural health care providers received more than $300 million from the federal government and, since then, hundreds of millions more from federal and state governments.
In 2022, Providence Health & Services hospitals in Washington state snagged $28 million from the federal government. That was on top of $308 million in 2021 and $198 million in 2020, totaling more than $535 million in COVID-19 payments.
Providence, which is our state’s largest hospital network, has $10 billion in investments. It lost money in these investments in 2022. Now it wants the public to make up for its gambling on the stock market, with hundreds of millions of dollars infused via state and federal governments.
Providence has a 10-year branding and advertising contract with the Seattle Sounders at a reported cost of up to $10 million a year. Providence instituted an illegal program to get people who have health coverage to pay regardless of their coverage or potential coverage. Providence paid McKinsey & Company at least $45 million just in 2019 to design this system.
Plus, the company denies abortion care, no questions asked or answered. It seems to think that a zygote is the equal of a newborn baby.
Nonprofit hospitals also enjoy lucrative tax exemptions.
“Providence avoids more than $1 billion a year in taxes. In exchange, the Internal Revenue Service requires them to provide services, such as free care for the poor,” according to the New York Times. But in 2020, Providence spent less than 1 percent of its expenses on charity care.
Perhaps the worst hypocrisy is how these hospitals, crying wolf, are paying their chief executives. Keep in mind that these are tax-exempt institutions; it is odd that they behave like profit-maximizing centers.
This only makes sense in the words of Dr. Rod Hochman, Providence’s chief executive: “‘Nonprofit healthcare’ is a misnomer. It’s tax-exempt healthcare. It still makes profits.”
Hochman is leading the charge for profits and benefitting along the way. His salary soared from $4.1 million in 2016 to $11.5 million in 2017.
Hochman is a big wheel, but he has a lot of company in our state. Brian Ivie, CEO of Skagit Valley Hospital, received $1.1 million in 2021. Jeff Tomlin of EvergreenHealth in Kirkland received more than $1 million. The top three executives at Kaiser received more than $5 million combined. In Vancouver, the CEO of the Salmon Creek Hospital made $1.8 million.
MultiCare Health System, which received more than $280 million in federal coronavirus money just in 2021, paid its top three executives more than $6 million. Overlake in Bellevue paid its CEO more than $1.5 million. PeaceHealth Hospitals in Bellingham and Vancouver paid two executives more than $1.2 million each. Virginia Mason, which received $51 million in coronavirus money in August 2021, paid one officer $3.5 million and another $2.4 million.
And let’s not forget the children: Seattle Children’s Hospital received $79 million in COVID-19 payments in 2021 and paid its CEO and another executive more than $1.4 million, plus $1.1 million to a third executive.
Had enough? Let’s hope the Legislature has as well. Thanks to state Sen. Emily Randall (D-Bremerton) and Sen. Christine Rolfes (D-Bainbridge Island), the Legislature is considering Senate Bill 5767, an excess compensation tax on (so-called) nonprofit executives. It is a small tax, on compensation in excess of 10 times Washington’s average annual salary, which was $82,508 in 2021. So that means that no executive is taxed if their compensation is below $825,000. Under that threshold, they can comfortably reside in the top 1 percent of American households without paying the excess compensation tax. Only when their compensation rides into the top one-half of one percent of workers will their employer be taxed. And then only at 7.5 percent.
Compare that to Los Angeles, where initiative signatures are currently being gathered to limit compensation for hospital CEOs to the salary of the president of the United States: $450,000.
Hospital compensation isn’t a typical red/blue issue. The hospitals that keep executive compensation in check are almost all in rural areas, represented by Republicans. The top executive of Mid Valley Hospital in Omak makes $270,000. The top executive in the Moses Lake hospital makes $408,000.
It is the hospitals in the blue areas — Seattle and the Sound corridor — that are failing to control executive compensation.
The excess compensation tax would be a very slight tap on the brakes for overcompensating executives. It means that Virginia Mason, for example, would be taxed about $350,000 for overcompensating two of its executives, who make $6 million combined.
This tax would probably bring in $3 million to $5 million a year. This is peanuts in the state budget. But $3 million in new funds would enable immigrants to access health care plans in our state marketplace, as proposed in the House budget, but not yet in the Senate budget.
This tax makes a lot more sense than continuing to line the pockets of “nonprofit” hospital executives.
John Burbank is the founder and retired executive director of the Economic Opportunity Institute in Seattle.
Read more of the April 12-18, 2023 issue.