Connecticut's Fortunate Forty

$1 Million-a-Year Charitable Hospital Executives Who May Not Need Holiday Gifts

As the holidays approach, it seems an appropriate moment to reflect a little bit on the state of charity in the health care system. In researching “Give the Hospitals All the Money” and forthcoming stories on state health care reform and the media’s misguided obsession with private equity, we dug up some choice tidbits worth sharing for light holiday reading.

Lately we’ve been deluged with stories about how private equity investors are “taking over” or “hijacking health care.” It really isn’t true, at least not when it comes to doctors’ practices and acute care hospital.

While some of the techniques that PE firms use to extract wealth from physicians and hospitals are obscene, the current wave of PE investment in acute health care is cyclical. For doctors’ practices, it’s nearly indistinguishable from a previous Wall Street physician practice buying binge in the 1990s, which collapsed in a sudden wave of bankruptcies under the weight of excess debt. Fast forward and the largest PE-owned physician practice company went bankrupt last spring, with another large one following suit in September.

In the hospital sector, PE has focused on dying hospitals primarily in rural areas, and even there PE firms own just 2% of rural hospitals. Rural hospitals have been in crisis for decades, and PE extracts wealth through financial engineering, especially complex real estate deals. But most of those hospitals were destroyed by previous owners before PE vultures arrived to gnaw on the carcasses.

Subscribers will have a meatier look at private equity and the misguided media “takeover” narrative later this week, but the point is that PE is a temporary sideshow. The majority of doctors are now employed by hospitals, and the majority of hospitals (58%) are still owned by tax-exempt “charitable” corporations, the largest controlled by universities and churches. Less than a quarter of community hospitals (24%) are owned for-profit corporations and most of those owners are not private equity firms.

While tax exempt hospital owners don’t always make quite as much money quite as quickly as the for-profit gang, many have plenty of reason for good holiday cheer. We took a look at federal tax forms for the two biggest systems in Connecticut, a state roughly the size of Los Angeles County, but with a smaller population – 3.9 million people. Hartford HealthCare and Yale-New Haven Health dominate the state, and Yale-New Haven is in the process of grabbing up 3 more hospitals as private equity-owned Prospect Medical Holdings - predictably - exits the state after 8 years.

Recent academic studies have found that tax exempt hospitals provide far less true charity care than they earn in profits, that more profitable hospitals provide less on a dollar-for-dollar basis than financially weaker hospitals, and that tax exempt hospitals actually provide less charity care than for-profit companies. In Connecticut, scrounging for nickels allowed Yale-New Haven and Hartford to pay at least forty people more than $1,000,000 in compensation in fiscal year 2022. We say “at least,” because you have to gather the 40+ page forms for each subsidiary hospital to find all of the lucky winners, and there’s always the possibility that Healing and Stealing missed someone.

Both systems were in the process of changing some of their senior leadership in fiscal year 2022, so most of the compensation reported for two Yale-New Haven Health executives is from calendar year 2021, not fiscal 2022. But it’s the holiday season, so let’s not quibble. Below is a table of Connecticut’s Fortunate Forty.

For those who don’t live in Connecticut, the particular names might not mean that much, but the list may be a helpful reminder of 1) who really controls our hospitals and doctors 2) that “not-for-profit” status really is increasingly a euphemism for “large corporations that don’t pay taxes” and 3) you can find this information about your local tax-exempt hospitals with a little digging. Pro-Publica maintains a helpful site to download IRS Forms 990, but you can get them at the IRS too. Executive compensation is found in two places – Part VII of the main form, and Schedule J. If they file Schedule J, that’s the more complete source.

If your community’s hospitals are owned for-profit companies and their stock trades on public markets like the New York Stock Exchange or NASDAQ, you can find executive compensation in the annual proxy statement filed with the federal Securities and Exchange Commission. Here’s a link to the last proxy from HCA, the biggest for-profit hospital company. If your local hospitals are owned by private equity or some other corporation that doesn’t report to the SEC, some states do require all hospitals to report executive compensation. If not, don’t worry. The owners will probably cash out soon, and the buyers are likely to have disclosure requirements. In any event, here are some folks that are doing just fine this holiday season. Unless you’re a family member, you probably don’t need to think about gifts for them.

*Apologies to any readers whose religious and family traditions may not include a winter gift-giving holiday for using this rhetorical device.