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Hospitals Scramble to Balance Budgets

August 6, 2013
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With reduced state subsides, many non-profit hospitals are no longer awash in cash and are scrambling to find a way to meet their budget goals. In the past few weeks I have been approached by a number of healthcare professionals who work at different institutions and yet tell a similar story: Hospital administrators are scrambling for ways to balance their budget.

Here are the most common approaches:

Complain: Hospitals create standard letters for their employees to send to their elected officials to express how unfair the cuts to their hospital are and how it may adversely affect patient care.

Beg: Hospitals are increasing their requests for donations. At one local hospital, workers, many who have more critical budget crises at home, are being asked to donate some of their income to the hospital.

Reduce spending: Many hospitals are looking to reduce spending by reducing their staff. At one hospital, according to my source, doctors were told to reduce the number of blood tests they were ordering.

And yet it appears to me that the most obvious way of reducing a hospital’s debt would be to have the administrators, who are earning megabucks, immediately and voluntarily reduce their salaries. Apparently, these administrators are willing to sacrifice everyone but themselves.

What if we requested hospitals that have a non-profit status, to cap their salaries and distribute the savings back to their hospital?

I decided to use a very liberal compensation of $750,000 per year, per hospital employee, as the benchmark for this tax. Charitable hospitals paying their workers more, if they wish to keep their non-profit status, and all of the benefits that go along with it (exemption from corporate income tax, local and state tax, and the ability to allow contributors to make tax-deductible contributions), would have to pay a penalty equal to the amount that any employee earns over $750,000 — excuse me if you feel I am being too charitable here.

For example, if an administrator is paid $1,000,000, then the hospital would be required to contribute $250,000 in luxury tax to help pay for affordable healthcare. If a hospital refuses, they would lose their charitable status and the ability to beg for a few dollars when we check out at our local supermarket.

The downside of being a non-profit organization is that your taxes must be available for public inspection and these returns (form 990) are available to anyone who wishes to look for them. I decided not to name all the doctors or administrators, as other stories including some in this magazine have, but to concentrate on the bottom line: How much would these hospitals have to pay into a luxury tax system based on their 2010 tax returns.

I don’t wish any of you to be worried that some of these administrators or doctors may be forced to get on with just $750,000, if their employer does not wish to pay an extra tax, since many earn additional money, through lecturing, or writing, or working for the pharmaceutical industry.

There are about 2,400 non-profit hospitals in the United States; it would be impossible for my staff of one to review every center. With that in mind I decided to pick a few hospitals in the metropolitan area as well as some of the “ best” non-profit hospitals in the country, to demonstrate how much “luxury tax” would be available for our desperately needy healthcare system.

Below is an estimate (note that this is likely an underestimation since not all the salaries are available on the form 990) in dollars that each of these institutions would be responsible for under the “luxury tax” system.

The Mayo Clinic – $51,515,791

The New York and Presbyterian Hospital – $12,593,689

Cedars-Sinai – $10,947,054

Cleveland Clinic – $7,930,536

Maimonides Medical Center – $6,061,901

Hackensack University Medical Center – $5,400,012

Staten Island University Hospital – $5,194,861

NorthShore University HealthSystem – $5,131,310

Northern Westchester Hospital – $989,583.

My review of the Mayo Clinic noted at least 46 individuals earning more than $750,000 a year with Dr. Glenn Forbes earning the most at $5,390,421.

The Post-Bulletin, a newspaper in Rochester, Minn., home of the Mayo Clinic, quoted their U.S. senator, Amy Klobuchar in a recent story: “If more clinics and hospitals did what Mayo does in terms of quality, low-cost care, we would be so much better off as a country, and that’s exactly what we need to encourage.” I wonder if the senator knew the salaries of the Mayo Clinic’s top earners when she gave the center her accolades in providing “low-cost care.”

Dr. Steven Nissen, chairman of the department of cardiology, and outspoken critic of our healthcare system, might want to look into the excessive salaries at his own institution. At least 18 individuals at Cleveland Clinic earn more than $750,000 with Dr. Delos Cosgrove earning $2,314,142. That’s a lot of money when you consider the median sales price for a home in Cleveland is $56,900, according to the web site Trulia.com .

Even Bronx Lebanon, a hospital that caters to some of the poorest in our metro area, seems to be overflowing with cash since there are seven employees earning more than $750,000. And that includes a staggering $2,462,401 for Miguel Fuentes and a salary of $1,742,424 for an orthopedic doctor who cares for the indigent.

If we only looked at these nine hospitals, there would be well over $100 million available, if we used my tax plan, to help fund affordable healthcare. Since there are over 2,400 non-profit hospitals in the United States there is likely to billions of dollars available, under this type of tax plan, to help fund president Obama’s affordable healthcare.

Of course, the hospitals could consider another option. They could reduce the pay to their executives, to diminish their contribution in luxury tax, and use those dollars to prevent laying off their staff or reducing necessary lab tests!

 

Dr. Evan S. Levine is a cardiologist in New York and a Clinical Assistant Professor of Medicine at Montefiore Medical Center – Albert Einstein College of Medicine. He is also the author of the book “What Your Doctor Won’t (or can’t) Tell You”. He lives in Connecticut with his wife and children.

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3 Responses to Hospitals Scramble to Balance Budgets

  1. globalcitizen on August 22, 2013 at 10:21 am

    Good ideas! Try running for office on that platform and see where you get. Still, thank you Dr. Levine for exposing this stuff. Why do we never hear about these things on the news? Perhaps the networks’ advertisers wouldn’t like it?

    • heartdude on December 31, 2015 at 8:25 pm

      Thank you for your kind words. Check out my latest podcasts where I add humor and irreverence to my efforts to expose this mess.

      Hey,

      I just listened to “Got A Big Prostate? Say No to Rapaflo” of the “Real Medicine’s Podcast” podcast on PodOmatic.

      Check it out:

      http://realmedicine.podomatic.com/entry/2015-12-21T13_39_03-08_00

      Sent from my iPhone

  2. liberalvoice on August 14, 2013 at 6:10 pm

    The problem is that as Americans we no longer (for a half century now) think of ourselves collectively. It’s every-man/woman-for-themselves now. So when the lowest paid pay the price for the condition of the economy (via layoffs, pay cuts), they’re expected to just bite the bullet, so the comfortable need not be disturbed.

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