At a time when many rural hospitals are going out of business due to revenue shortfalls (see: The rural hospital closure crisis: 15 key findings and trends), larger health systems are seeking other ways to protect their bottom line such as investing in healthcare startups and innovation (see: Health Systems Accelerate Investments in Innovation; Financial Challenges for Non-Profit Hospitals; Lab Budget Reductions Anticipated). Here is a quote from this article listing the major health system players in this space:
* Kaiser Permanente Ventures: More than 15 years of innovation investment experience, high-profile limited partner investors such as Tufts Health Plan, and about $400 million in committed capital
* Partners Innovation Fund (PIF): Established in 2007 with a commitment of $35 million from two of Partners HealthCare's hospitals, Brigham and Women's Hospital and Massachusetts General Hospital; focused on innovations in therapy, diagnostics, information technology, and medical devices....
* Cleveland Clinic Innovations: CCI has helped launch more than 75 companies; the investment house has more than 2,700 patent applications, with about 700 issued patents; and companies associated with CCI have drawn more than $910 million in equity investment
Mayo Clinic has recently been the recipient of some undesired publicity relating to a stated preference for private healthcare insurance companies (see: Cherry-picking patients may be business as usual for not-for-profits like Mayo). Below is an excerpt from this article:
When the CEO of Mayo Clinic said the world-renowned, not-for-profit health system would prioritize caring for privately insured patients over publicly insured ones, it triggered an inquiry from the Minnesota Health Department and dismay and criticism from researchers and ethicists.“We're asking ... if the patient has commercial insurance, or they're Medicaid or Medicare patients and they're equal, that we prioritize the commercial insured patients enough so ... we can be financially strong at the end of the year to continue to advance, advance our mission,” CEO Dr. John Noseworthy told staff.....It's unclear whether Noseworthy's statements represent an explicit change in policy for the health system or if Mayo, acting up that statement, would violate any laws, including federal civil rights statutes....Even if Mayo is picking and choosing its patients based on insurance, it may not be significantly different from the policies and practices of many other hospitals....In a subsequent statement, Noseworthy said that medical need would always be the "primary factor" in making patient appointments....
Not-for-profit hospitals are exempt from federal, state and local taxes that, by one estimate, added up to $24.6 billion in 2011. In theory, they receive these exemptions in return for providing benefits to the community, at the core of which is caring for the publicly insured, uninsured or indigent. But the extent to which hospitals actually offer community benefits varies substantially, and their status as tax-exempt has come under scrutiny in recent years. The IRS does not set a minimum of community benefits that hospitals must provide to gain tax exemptions. In 2013, a study published in the New England Journal of Medicine found that not-for-profit hospitals in 2009 spent on average 7.5% of their operating costs on community benefits and charity care. A 2009 IRS study of not-for-profit hospitals shed light on imbalances within the sector, showing that community benefits were concentrated in a relatively small number of hospitals. About 9% of the hospitals accounted for 60% of the aggregate community benefit expenditures....
I have posted a number of blog notes in the past questioning the status of tax of non-profit hospitals (see: Cities Begin to Question Non-Proft Status, Tax Breaks of Their Hospitals; Hospital Entrepreneurship and the Salaries of Non-Profit Hospital Executives). It seems to me that this situation needs to be reexamined if some large portion of their income is derived from investments in medical startups and if, as with Mayo, they show a preference for patients covered by private insurance.