The Myth of the Non-Profit Hospital

Posted on Friday, August 30th, 2013 at 1:00 am    

Many clients come to us about injuries or death suffered as a result of malpractice that occurred in a hospital.  Often they were attracted to that hospital by the facility’s reputation, advertising, or medical school affiliation.  And invariably, they are stunned to learn that their prospects for recovering damages against the hospital itself are minimal–under Massachusetts law, the maximum recovery has long been just $20,000, recently increased to $100,000.  This amount is barely sufficient to cover the costs and fees associated with bringing a lawsuit, and completely inadequate to compensate a family for serious injury or death.

So why the limitation?  Because most Massachusetts hospitals are “non-profit” organizations, and state law grants them this limited liability. (Individual providers such as doctors, residents, nurses, technicians and other staff are still responsible for their negligence, and covered by their own and/or the hospital’s malpractice insurance.)

But to treat these hospitals as “non-profit” or “charitable” corporations, and lump them together with local youth groups, museums, and service organizations is a farce that doesn’t reflect the financial and economic realities of the situation: Massachusetts hospitals are BIG business, with many routinely earning annual profits in the millions of dollars.

A recently released report from the Massachusetts Center for Health Information and Analysis (CHIA) sheds some light on the financial health of hospitals in the Commonwealth.  The report, containing information about hospital profits, liquidity, and overall financial health shows that many hospitals are turning handsome profits.  Take for example, Children’s Hospital Medical Center in Boston.  Children’s has $2.5 billion in assets, and made a profit of some $93 million over the last six months.  Partners, the largest health care system in Massachusetts that includes Brigham & Women’s Hospital and Massachusetts General Hospital, among others, reported an overall profit of $76 million, most of it from those two flagship hospitals.  Dana-Farber–unquestionably a facility that provides excellent care for cancer patients–reported an operating loss of $23 million, yet its operating surplus rose by $11 million to $35 million, and it holds more than $1 billion in net assets.  That’s a lot of Jimmy Fund contributions.  And sleepy little Cooley Dickinson Hospital in Northampton racked up $11 million in profits.

And these hospitals are run like businesses.  They hire financially savvy management teams and pay outside consultants to come up with business development strategies.  They increase their potential earnings by focusing on profitable services, such as obstetrics and cardiac surgery.  And they advertise like any other business–on billboards, television and radio.

Yet Massachusetts remains one of a handful of states to give hospitals the benefit of limited liability.  It’s a surprise to patients who usually have no idea until it’s too late.  And given the power of these institutions and the staggering dollar amount involved, it’s unlikely to change any time soon.

Read the summary report for Quarter 2 of 2013 here.   More detailed information about each individual hospital is available on the CHIA website.