Washington, DC — Do not be intimidated by the title of this report, Structural Determinants of Health: Hospitals’ Unequal Capital Investments Drive Health Inequities. The report reveals how the quality of health care is a reflection of the brick-and-mortar edifices that dispense said care.
An array of policies dating back to 1946 and continuing to the present day have favored hospitals in some communities while limiting access in others to the financing needed for investment in hospital buildings and technology.
Many nonprofit hospitals in poor and rural communities were built and financed by a 1946 government program meant to eliminate a shortage in care. Unequal distribution of funds reinforced the racial segregation of the times, but the inequities found in access to hospital funding in 1946 have been repeated and enhanced. This report examines how these forces affect access to and quality of care for the most vulnerable members of society.
The co-authors of the report, Eileen Appelbaum, Emma Curchin, and Rosemary Batt,* are experts in how the confluence of health policy, financial deregulation, IRS revenue rulings, and upside-down antitrust policy has shaped the US health system. The current health system reflects the legacy of the inequities found between hospitals’ funding, and the resulting inequities of health care outcomes between Black and white patients. Today, nearly half of Black patients are cared for in just a small number of highly segregated hospitals.
Since 1946 there have been other government policies or programs to reinforce the inequities in funds or access to capital for modernizing hospitals and technology. Two notable examples are a 1998 change in IRS guidelines allowing nonprofit hospitals to own for-profit subsidiaries, tax-tree, and the recent pandemic-related CARES Act.
The IRS rule allowing for tax-free for-profit spinoffs of large nonprofit, mostly academic, hospitals got the attention of venture capital firms eager to sponsor lucrative but tax-free medical start-ups as well as financial activities such as mergers and acquisitions. This alliance with venture capital soon turned into a windfall. It enriched some of the most well-endowed hospitals in the US, exacerbating inequalities in facilities and their ability to treat patients.
In response to the COVID-19 pandemic, the CARES Act of 2020 used a formula for allocating taxpayer dollars in the crucial first round of funding before there was a vaccine based on the providers’ share of Medicare payments in a previous year. This disproportionately favored wealthier hospitals over those with lower reimbursements or who were more dependent on Medicaid. This unequal allocation formula exacerbated the stark differences in the quality of care in hospitals with little or no access to financing, with sometimes tragic consequences for Black COVID-19 patients.
The authors offer several recommendations for congressional action outlined in detail in the report:
- Congress should revisit public funding for investment in the physical infrastructure of hospitals and other health facilities with limited access to financial markets to right the wrongs of the past century.
- Congress should tax all profits above a certain threshold earned by for-profit subsidiaries of nonprofit hospitals.
- Congress should establish rules governing what qualifies as charity care and require reduced rate or free care of the indigent as a condition for nonprofit status. The value of hospitals’ charity care should be comparable to the amount of tax breaks they receive.
*Eileen Appelbaum is Co-Director of the Center for Economic and Policy Research (CEPR). Her current research, in collaboration with Rosemary Batt focuses on private equity and financialization in health care. Her previous book with Rosemary Batt, Private Equity at Work: When Wall Street Manages Main Street,” was selected by the Academy of Management as one of the four best books of 2014 and 2015.
In her role as CEPR’s Research Assistant, Emma Curchin has expanded her research to include private equity, Medicare Advantage, antitrust, and racial gaps in health outcomes.
Rosemary Batt is the Alice Hanson Cook Professor of Women and Work at the ILR School, Cornell University. She is a Professor in Human Resource Studies and International and Comparative Labor. Her current research, in collaboration with Eileen Appelbaum, focuses on the role of private equity in behavioral health and the use of IT, including AI, on both the treatment of patients and the monetization of their personal data.
###
