We're seeing a lot of attention paid to nonprofit hospitals this week.  A state legislator in Boston is proposing that caps be put in place on executive pay at nonprofit hospitals in the Boston-area.  According to today’s Boston Herald, fourteen top executives at nonprofit hospitals raked in million-dollar-plus pay packages, a sharp increase from just a few years ago.  The article outlines a handful of CEOs at local hospitals who have received over $1 million salary, whereas only one executive in 2004 received a salary  of comparable weight.  State Senator Mark Montigny is raising this issue, proposing that salaries are capped at $500,000 at nonprofit charities whose annual revenues exceed $1 billion.  Nonprofit executive pay has been a part of discussions on accountability for years—regardless of the industry. 

Executive pay isn’t the only being discussed this week when it comes to nonprofit hospitals.  The Wall Street Journal addresses the controversy surrounding the revenue nonprofit hospitals bring in, where the money is being spent, and the tax breaks they receive.  According to the paper, the net income of the 50 largest nonprofit hospitals nationwide was more than $4 billion in 2006, up from less than $1 billion in 2001.  So why the extraordinary growth?  And where is this new-found money going?

That’s where the controversy lies.   The article questions how much money is being spent on free treatment to those in need, or what the hospitals are expected to provide in order to qualify for the tax breaks.  The WSJ points out Northwestern Memorial hospital, that, in 2006, spent $20.8 million on charity care or less than 2% of its total revenue.  Ironically, the hospital’s former CEO received a $16.4 million payout.  The article points out that other hospitals in the same area spent roughly 14% of their revenue on charity care.

The article continues to discuss the tax breaks hospitals receive and the disparities over executive pay and how the revenues of hospitals are distributed, leading to the ultimate question—if nonprofit hospitals bring in so much revenue, receive millions in tax breaks, and don’t deliver on the requirements of benefiting the community—why are they nonprofits?  That question, of course, is left open-ended as there are many hospitals who are providing charity work and the benefit to community requirement set forth for tax reasons is loosely defined, it is hard to say who isn’t making a difference.  

What do you think of the news relating to nonprofit hospitals this week? Should salary caps or tighter restrictions on tax breaks be in place?