Jun 21, 2019

The corporatization of hospital systems

Illustration: Lazaro Gamio/Axios

Not-for-profit hospital systems increasingly operate more like corporate titans on the stock exchanges than the charities they promote themselves to be.

The big picture: As hospital systems have gotten larger, they have hosted more investor calls, released more financial data and attended more conferences and roadshows to attract banks and municipal debt buyers — all while health care spending continues to soar.

Where things stand: Almost 60% of community hospitals are private and nonprofit, and therefore don't pay income or property taxes. But hospitals are more on par with pharmaceutical giants and insurance companies than soup kitchens.

  • Most hospitals are part of larger systems after years of frenetic merger and acquisition activity.
  • Kaiser Permanente ranks just behind Johnson & Johnson in revenue — which would make it one of the 50 largest corporations in the country.
  • More than two dozen private, not-for-profit hospital systems would sit in the Fortune 500 rankings.

The intrigue: Hospitals that want to erect new buildings or buy new technology issue debt in municipal bond markets instead of the public markets. And more hospital systems "increasingly are trying to sell themselves to investors as they expand and become more complex to ensure they get the best rates when they borrow," the Wall Street Journal reported in 2016.

  • The 2008 financial meltdown led to more regulations for banks and investment firms in the municipal markets. As a result, those groups have been pushing for more disclosure and transparency from hospitals, said Eb LeMaster, a managing director at health care financial advisory firm Ponder & Co.
  • Hundreds of hospitals, ranging from small $100 million facilities to $20 billion behemoths, now regularly post financial documents and other data on municipal bond sites.

Yes, but: While transparency has increased, it's still not perfect.

  • CommonSpirit Health, the new hospital system that merged Catholic Health Initiatives and Dignity Health, held an investor day in Chicago this week — an event normally conducted by companies trading on the public markets.
  • The investor day comes roughly a month before CommonSpirit executives will tour London, New York, Boston, Chicago and Los Angeles to gin up interest in a $6 billion bond offering. That offering will include tax-exempt bonds, which the public subsidizes.
  • However, media were excluded from attending the investor day. A CommonSpirit spokesperson justified the policy by saying "it was important ... to provide information directly to those who have purchased the health system's bonds."

The bottom line: "Not-for-profit" does not mean "no profit."

  • Hospitals are swimming in cash, which has attracted investors to them. But hospitals' financial pursuits have raised concerns about whether they are continuing to chase revenue and inflate health care costs at the expense of patients.

Go deeper: How banks and law firms make millions from hospital debt

Go deeper

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Joe Biden. Photo: Scott Olson / Staff

Joe Biden said he's spoken to Sen. Bernie Sanders and former President Barack Obama about selecting a running mate — and that he wants to build "a bench of younger, really qualified people" who can lead the nation over the course of the next four presidential cycles.

Driving the news: Biden spoke about the state of the 2020 race during a virtual fundraiser on Friday night that was opened to pooled coverage.

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Michael Atkinson, inspector general of the intelligence community. Photo: Bill Clark / Getty Images

President Trump notified key lawmakers on Friday that he’s firing Michael Atkinson, the intelligence community's inspector general, who first alerted Congress last September of an "urgent" complaint from an official involving Trump's correspondence with the Ukrainian president.

Why it matters: The move, to take effect in 30 days, comes amid a broader initiative to purge the administration of officials seen as disloyal to the president.

Coronavirus dashboard

Illustration: Axios Visuals

  1. Global: Total confirmed cases as of 10 p.m. ET: 1,097,909 — Total deaths: 59,131 — Total recoveries: 226,106Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 277,828 — Total deaths: 7,406 — Total recoveries: 9,772Map.
  3. Public health latest: The CDC is recommending Americans wear face coverings in public to help stop the spread of the coronavirus. The federal government will cover the costs of COVID-19 treatment for the uninsured, Health and Human Services Secretary Alex Azar said.
  4. 2020 latest: "I think a lot of people cheat with mail-in voting," President Trump said of the 2020 election, as more states hold primary elections by mail. Montana Gov. Steve Bullock said Friday that every county in the state opted to expand mail-in voting for the state's June 2 primary.
  5. Business updates: America's small business bailout is off to a bad start. The DOT is urging airlines to refund passengers due to canceled or rescheduled flights, but won't take action against airlines that provide vouchers or credits.
  6. Oil latest: The amount of gas American drivers are consuming dropped to levels not seen in more than 25 years, government data shows. Trump is calling on the Energy Department to find more places to store oil.
  7. Tech updates: Twitter will allow ads containing references to the coronavirus under certain use cases.
  8. U.S.S. Theodore Roosevelt: Senators call for independent investigation into firing of Navy captain.
  9. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  10. Other resources: CDC on how to avoid the virus, what to do if you get it.

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