Not-for-profits are not the answer

The Berejiklian government wants to give over the operation of the new Maitland hospital to a not-for-profit organisation. Recent experiences at St Vincent’s, among others, should make us wonder why.

Just before Christmas, with next to zero warning or consultation with staff, management at St Vincent’s Hospital in Darlinghurst closed down half of the hospital’s beds in response to financial difficulties.

Fairfax media revealed that St Vincent’s was $18 million in the  red although the hospital was allocated more than $362 million  in state government funding in  the 2016-17 financial year, according to its service
agreement with NSW Health.

The Sydney Morning Herald found that at least two executives at St Vincent’s “were rewarded with $25,000 bonuses for making budget at the end of the 2016-17 year, despite the hospital being over budget less than one month later”.

Of course, when any private involvement in health fails, the burden falls on staff and the community. At St Vincent’s there was an expectation from management that staff take leave at their whim. Many nurses were deployed into areas where they had little or no expertise. Stress levels are bound to increase when nurses are thrust into unfamiliar wards and units without adequate support. As always, this has consequences for the quality
and safety of patient care.

St Vincent’s travails highlight a common misconception about not-for-profit hospitals. Not-for-profit suggests they don’t care about making money – which they do. In fact, which they must. They are subject to the same economic laws as other entities running complex organisations like a hospital.

The Berejiklian government has been clear in its wish to involve the not-for-profit sector in operations in the pubic health system, notably at the new hospital at Maitland to which the Association remains resolutely opposed.

US not-for-profits are major corporations

The United States also provides us with insightful experiences about the ambiguous role of so called not-for–profits in healthcare.

A 2016 study by health economists at John Hopkins University found that 7 of the 10 most profitable hospitals in the United States are not-for-profit hospitals (Health Affairs, May 2016).

Each of these hospitals made more than $US163 million in profits from patient care services prompting the researchers to say: “Some (not-for-profit) hospitals are obtaining outrageous profits”.

The study found that the most profitable hospitals “have monopolies or near monopolies in their communities”, an observation which should sound the alarm for the people of Maitland.

Some of the American nor-for-profit hospitals are massive businesses. The famous Cleveland Clinic has annual revenue of $7.2 billion and has over 50,000 employees. Its 2016 profits were $514 million. Over four years it made $2.7 billion in profits. It’s CEO, Toby Cosgrove, an adviser to Donald Trump, earned a tick under $US5 million a year.

Despite these massive figures the Cleveland Clinic is still classified  as a not-for-profit hospital. The  key to its profitability, like other
US not-for-profit hospitals, is its tax-exempt status which, theoretically, comes with community responsibilities.

But an investigation by the online magazine Politico last year found that the Cleveland Clinic “campus” comes with luxury hotels, boutiques and chic organic markets for its well-heeled overseas patients – mainly from the Middle East. At the same time it is surrounded by poverty-stricken local communities that see very little of the profits or health benefits of the hospital.

Of course the American context is different but their experiences with not-for-profit hospitals along with our own should alert us to any complacency about handing over public health services to the not-for-profit sector.

We see such a move as privatisation under another guise and remain convinced that the best and most economic delivery of health services comes through a well-funded, well-resourced public health system.