Category: Incentives

At Nonprofit Hospitals Revenue Rises and Charity Care Falls

(p. 7) On paper, the average value of community benefits for all nonprofits about equals the value of the tax exemption, but there is tremendous variation among individual hospitals, with many falling short. There is also intense disagreement about how those community benefits are calculated and whether they actually serve the community in question.

Charity medical care is what most people think of when it comes to a community benefit, and before 1969 that was the legal requirement for hospitals to qualify for tax-exempt status. In that year, the tax code was changed to allow for a wide range of expenses to qualify as community benefits. Charitable care became optional and it was left up to the hospitals to decide how to pay back that debt. Hospitals could even declare that accepting Medicaid insurance was a community benefit and write off the difference between the Medicaid payment and their own calculations of cost.

An analysis by Politico found that since the full Affordable Care Act coverage expansion, which brought millions more paying customers into the field, revenue in the top seven nonprofit hospitals (as ranked by U.S. News & World Report) increased by 15 percent, while charity care — the most tangible aspect of community benefit — decreased by 35 percent.

. . .

The average chief executive’s package at nonprofit hospitals is worth $3.5 million annually. (According to I.R.S. regulations, “No part of their net earnings is allowed to inure to the benefit of any private shareholder or individual.”) From 2005 to 2015, average chief executive compensation in nonprofit hospitals increased by 93 percent. Over that same period, pediatricians saw a 15 percent salary increase. Nurses got 3 percent.

For the full commentary, see:

Ofri, Danielle. “Nonprofit Hospitals Are Too Profitable.” The New York Times, SundayReview Section (Sunday, February 23, 2020): 7.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 20, 2020, and has the title “Why Are Nonprofit Hospitals So Highly Profitable.”)

The Politico article mentioned in the passages quoted above, is:

Diamond, Dan. “Health Care; How Hospitals Got Richer Off Obamacare.” Politico (Posted July 17, 2017). Available from https://www.politico.com/interactives/2017/obamacare-non-profit-hospital-taxes/.

Stents Do Not Reduce Heart Attacks or Deaths

(p. A17) The findings of a large federal study on bypass surgeries and stents call into question the medical care provided to tens of thousands of heart disease patients with blocked coronary arteries, scientists reported at the annual meeting of the American Heart Association on Saturday [Nov. 16, 2019].

The new study found that patients who received drug therapy alone did not experience more heart attacks or die more often than those who also received bypass surgery or stents, tiny wire cages used to open narrowed arteries.

That finding held true for patients with several severely blocked coronary arteries. Stenting and bypass procedures, however, did help some patients with intractable chest pain, called angina.

. . .

Stenting costs an average of $25,000 per patient; bypass surgery costs an average of $45,000 in the United States. The nation could save more than $775 million a year by not giving stents to the 31,000 patients who get the devices even though they have no chest pain, Dr. Hochman said.

. . .

But getting a stent does not obviate the need for medical therapy, Dr. Boden noted. Since patients with stents need an additional anti-clotting drug, they actually wind up taking more medication than patients who are treated with drugs alone.

About a third of stent patients develop chest pain again within 30 days to six months and end up with receiving another stent, Dr. Boden added.

For the full story, see:

Kolata, Gina. “Drugs Are Shown to Reduce Need For Surgery to Fix Blocked Arteries.” The New York Times, First Section (Sunday, November 17, 2019): A17.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 16, 2019, and has the title “Surgery for Blocked Arteries Is Often Unwarranted, Researchers Find.” The online version says that the page number of the New York print edition was A19. The page number of my National edition was A17.)

High Palladium Prices Incentivize More Mining and Search for Substitutes

(p. B13) Palladium prices are at their highest level in nearly two decades, as investors bet that rising global growth will buoy automobile production and stoke demand for the rare metal.

. . .

Longer term, the auto industry may consider switching to platinum in gasoline engines if the price of palladium continues to climb, some market participants said.

Shree Kargutkar, portfolio manager at Sprott Asset Management, said he thinks platinum provides a better long-term value alternative to palladium given palladium’s sharp rise.

Still, changes in the automotive industry don’t pose an immediate threat to the rally, he said. Those shifts and mining companies’ efforts to bring more areas of supply on line to capitalize on higher prices are likely to take years.

“We’re not at a point where the palladium bulls have something to worry about,” he said.

For the full story, see:

Ira Iosebashvili and Amrith Ramkumar. “Palladium Soars on Hopes for Growth.” The Wall Street Journal (Tuesday, Oct. 24, 2017): B13.

(Note: ellipsis added.)

(Note: the online version of the story has the date Oct. 23, 2017, and the title “Palladium Prices Soar in Sign of Global Growth and Auto Demand.” Where there are minor differences in wording, the passages quoted above follow the online version.)

Fear of Malpractice Suits Increases Useless Medical Care by 5%

(p. B4) Researchers from Duke and M.I.T. . . . offer what is perhaps the most precise estimate of how much defensive medicine matters, at least for care in the hospital. They found that the possibility of a lawsuit increased the intensity of health care that patients received in the hospital by about 5 percent — and that those patients who got the extra care were no better off.

“There is defensive medicine,” said Jonathan Gruber, a health economist at M.I.T. and an author of the paper, which was published in draft form Monday [July 23, 2018] by the National Bureau of Economic Research. “But that defensive medicine is not explaining a large share of what’s driving U.S. health care costs.”

Mr. Gruber and Michael D. Frakes, a Duke economist and lawyer, looked at the health care system for active-duty members of the military. Under longstanding law, such patients get access to a government health care system but are barred from suing government doctors and hospitals for malpractice. Their family members can also use the military hospitals, but they can sue for malpractice if they wish.

Their study looked at what happened to the hospital care that military members received when a base closing forced them to use their benefits in civilian hospitals, where it was possible to sue. Spending on their health care increased, particularly on extra diagnostic tests.

They also found that, even within the military hospitals, family members who could sue tended to get more tests than those who could not.

For the full commentary, see:

Margot Sanger-Katz. “Doctors’ Fear of Lawsuits May Hit Patients in the Wallet, Study Hints.” The New York Times (Tuesday, July 23, 2018): B4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 23, 2018, and has the title “A Fear of Lawsuits Really Does Seem to Result in Extra Medical Tests.”)

The Frakes and Gruber working paper, mentioned above, is:

Frakes, Michael D., and Jonathan Gruber. “Defensive Medicine: Evidence from Military Immunity.” National Bureau of Economic Research, Inc., NBER Working Paper # 24846, July 2018.

Under Chinese Socialized Medicine, Long Waits, Bribes, and Violent Attacks on Physicians Are Common

(p. A1) BEIJING — Well before dawn, nearly a hundred people stood in line outside one of the capital’s top hospitals.

They were hoping to get an appointment with a specialist, a chance for access to the best health care in the country. Scalpers hawked medical visits for a fee, ignoring repeated crackdowns by the government.

. . .

The long lines, a standard feature of hospital visits in China, are a symptom of a health care system in crisis.

. . .

(p. A8) Instead of going to a doctor’s office or a community clinic, people rush to the hospitals to see specialists, even for fevers and headaches. This winter, flu-stricken patients camped out overnight with blankets in the corridors of several Beijing hospitals, according to state media.

Hospitals are understaffed and overwhelmed. Specialists are overworked, seeing as many as 200 patients a day.

And people are frustrated, with some resorting to violence. In China, attacks on doctors are so common that they have a name: “yi nao,” or “medical disturbance.” Continue reading “Under Chinese Socialized Medicine, Long Waits, Bribes, and Violent Attacks on Physicians Are Common”

Finnish Universal Basic Income Did Not Increase Labor Supply

(p. A8) A much-watched experiment in Finland failed to provide evidence that offering people a guaranteed income is the answer to some of the insecurities caused by potentially profound changes in the jobs market.

Early results from a pilot program suggest that providing unemployed people with a minimum income doesn’t encourage them to find work, . . .

. . .

“The Finnish government hoped that UBI would increase labor supply and employment, but it did not,” said Christopher Pissarides, a professor of economics at the London School of Economics and a Nobel Prize winner.

For the full story, see:

Paul Hannon. “Basic Income Experiment Didn’t Boost Employment.” The Wall Street Journal (Saturday, Feb. 9, 2019): A8.

(Note: ellipses added.)

(Note: the online version of the story has the date Feb. 8, 2019, and has the title “Experiment in Finland With Guaranteed Income Creates Less Stress but No Jobs.”)

Absence of For-Profit Hospitals Hurts New York State

(p. A17) House Democrats’ new Medicare for All bill asserts “a moral imperative . . . to eliminate profit from the provision of health care.”
. . .
The Empire State’s hospital industry has been 100% nonprofit or government-owned for more than a decade. It’s a byproduct of longstanding, unusually restrictive ownership laws that squeeze for-profit general hospitals. The last one in the state closed its doors in 2008.
A report last year from the Albany-based Empire Center shows the unhappy results. The state health-care industry’s financial condition is chronically weak, with the second-worst operating margins and highest debt loads in the country. And there’s no evidence that expunging profit has reduced costs. New York’s per capita hospital spending is 18% higher than the national average.
The overall quality of New York’s hospitals, even factoring in Manhattan’s flagship institutions, is poor. Their average score on the federal government’s Hospital Compare report card was 2.18 stars out of five–last out of 50 states. Their collective safety grades from the Leapfrog Group and Consumer Reports magazine have also been dismal.
The state’s nonprofit hospitals also fall short on accessibility for the uninsured. On average they devoted 1.9% of revenues to charity care in 2015, a third less than privately owned hospitals nationwide.
Finally, New York’s antiprofit policy doesn’t even prevent people from getting rich. Seven-figure salaries are common among the state’s hospital executives. If banning profit is an effective way to improve health-care, there’s no evidence to be found in New York.

For the full commentary, see:
.Bill Hammond. “Banishing Profit Is Bad for Your Health; The Medicare for All proposal from House Democrats follows New York state’s bad example.” The Wall Street Journal (Tuesday, March 19, 2019): A17.
(Note: ellipsis internal to first paragraph, in original; ellipsis between paragraphs, added.)
(Note: the online version of the commentary has the date March 18, 2019.)

Small Spanish Firms Less Likely to Hire with Higher Minimum Wage

(p. B1) MADRID — As Spain grapples with a turbulent political crisis, one of Europe’s last Socialist governments may soon fall amid the rise of a new nationalism in the country. But whatever the outcome, Prime Minister Pedro Sánchez is leaving behind a signature legacy: a record increase in the minimum wage.
The 22 percent rise that took effect in January, to 1,050 euros (about $1,200) a month, is the largest in Spain in 40 years. Yet the move has ignited a debate over whether requiring employers to pay more of a living wage is a social watershed, or a risky attempt at economic engineering.
. . .
(p. B4) Over 95 percent of businesses in Spain are small and medium-size firms, many of which operate with thin margins, according to Celia Ferrero, the vice president of the National Federation of Self-Employed Workers.
“You won’t find people disputing that higher wages are needed,” said Ms. Ferrero, whose organization represents many smaller businesses. “The question is whether firms can afford it. Higher wages and social security taxes simply make it more expensive for employers to hire or maintain staffers.”
“It’s not that they don’t want to pay; they literally can’t,” she added.
Lucio Montero, the owner of General Events, which makes booths and backdrops for firms displaying wares at big conventions, employs eight workers on the outskirts of Madrid. He pays each €1,400 a month.
The higher minimum wage and increased social security charges will put upward pressure on his labor bill and already thin margins, he said. It is a cost that he can ill afford.
“I would need to think twice about hiring more people,” said Mr. Montero, walking around his tiny, sawdust-covered factory floor.

For the full story, see:
Liz Alderman. “Spain’s Minimum Wage Has Surged. So Has Debate.” The New York Times (Friday, March 8, 2019): B1 & B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 7, 2019, and has the title “Spain’s Minimum Wage Just Jumped. The Debate Is Continuing.”)

Distorted Incentives Can Lead to Short-Termism or to Long-Termism

(p. B1) Capitalism is often accused of fostering short-termism, making companies chase quarterly profit numbers to satisfy shareholders.
A better criticism is that the targets corporate executives aim for are grossly simplified, thanks to the twisting line of responsibility from corner office to fund manager to pension fund and ultimately to the savers who own the company.
These distorted incentives sometimes lead to short-termism; at other times, shareholder enthusiasm pushes executives to focus far too much on the long run, as in the wild mining boom that turned to bust in 2011, or the dot-com bubble.

For the full commentary, see:
James Mackintosh. “STREETWISE; Fixing Capitalism, One Disclosure at a Time.” The Wall Street Journal (Wednesday, Nov. 28, 2018): B1 & B12.
(Note: the online version of the commentary has the date Nov. 27, 2018.)

Chinese Communists Subsidize Ghost Town Construction

(p. C3) In China’s Inner Mongolia province, in the middle of the Gobi desert, row upon row of largely vacant apartment towers line the streets of Kangbashi, a new district of the city of Ordos. Earlier this month, Xu Yongfen and his family moved into one 28-story building. In the hallways there are a few signs of life–tricycles, slippers and pink children’s shoes in front of some doors. But most apartments remain unoccupied, their doors still covered in plastic wrap, and at street level, barren storefronts are visible in all directions. “This area is nearly totally empty,” Mr. Xu says, tapping a cigarette into a bowl of ashes at his dining room table.
The city has spent 14 years planning, erecting and maintaining Kangbashi, which has the distinction of being one of China’s best-known “ghost towns”–gleaming but sparsely populated new urban centers adjacent to older metropolises. Built by the dozen across the country, the new areas reflect–and were meant to accelerate–China’s economic boom. As the country’s growth has slowed, many of them have become serious liabilities, deep in debt, with little prospect of full occupancy anytime soon.
. . .
Many of China’s other ghost towns have yet to figure out how to jumpstart their economies without slipping back into the old pattern of borrowing and building. To become economically viable, some may take 20 or 30 years, or “maybe even forever,” said Zhou Jiangping, a professor of urban planning at the University of Hong Kong. In some cases, Mr. Zhou said, local officials encouraged ambitious plans to advance their own careers: “You see all these empty towns, these areas at the edge of cities. They may symbolize the power of some officials.” Because many of them then move on to other jobs, he said, they didn’t think about ensuring long-term growth.
. . .
Ordos City Investment Real Estate Development Co. recently resumed work on two housing projects that it had set aside five years ago, including Mr. Xu’s complex. “Kangbashi’s real-estate sales improved, so our company decided to restart construction,” said Wang Tianyong, a branch manager, noting that the government’s subsidy program favors new projects.

For the full story, see:
Dominique Fong. “China’s Ghost Towns Haunt Its Economy.” The Wall Street Journal (Saturday, June 16, 2018): C3.
(Note: ellipses added.)
(Note: the online version of the story has the date June 15, 2018.)

It No Longer Pays to Recycle

(p. B1) Oregon is serious about recycling. Its residents are accustomed to dutifully separating milk cartons, yogurt containers, cereal boxes and kombucha bottles from their trash to divert them from the landfill. But this year, because of a far-reaching rule change in China, some of the recyclables are ending up in the local dump anyway.
In recent months, in fact, thousands of tons of material left curbside for recycling in dozens of American cities and towns — including several in Oregon — have gone to landfills.
. . .
(p. B5) Recycling companies “used to get paid” by selling off recyclable materials, said Peter Spendelow, a policy analyst for the Department of Environmental Quality in Oregon. “Now they’re paying to have someone take it away.”
In some places, including parts of Idaho, Maine and Pennsylvania, waste managers are continuing to recycle but are passing higher costs on to customers, or are considering doing so.
“There are some states and some markets where mixed paper is at a negative value,” said Brent Bell, vice president of recycling at Waste Management, which handles 10 million tons of recycling per year. “We’ll let our customers make that decision, if they’d like to pay more and continue to recycle or to pay less and have it go to landfill.”
Mr. Spendelow said companies in rural areas, which tend to have higher expenses to get their materials to market, were being hit particularly hard. “They’re literally taking trucks straight to the landfill,” he said.

For the full story, see:
Livia Albeck-Ripka. “Your Recycling Gets Recycled, Right? Maybe, or Maybe Not?” The New York Times (Thursday, May 31, 2018): B1 & B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date May 29, 2018.)