Theft at the Public Till
some findings from the Philadelphia Inquirer examination of nonprofits I mentioned earlier: Hospitals have moved more than $3 billion into tax-exempt foundations and holding companies, where they have financed acquisitions, paid big salaries, and underwritten investments in for-profit businesses. One effect of these transfers is to make the hospitals appear less wealthy than they really are. Officials say the funds are used to buy equipment and replace old buildings. But little seems to flow back to the hospitals. In 1990, hospital foundations in Pennsylvania plowed back just 5 percent of their money, an analysis of tax returns of fifty-two hospital foundations shows. Thirty-nine percent of the money went for foundations’ administrative overhead and salaries; 56 percent went into stocks, bonds, and certificates of deposit. More than $40 billion was used to build hospital towers, offices, and parking garages. At the time of this expansion, the 1980s, hospital use was declining by 13 percent. Patients are paying for this overbuilding: Between 1984 and 1988, the portion of patient bills that covers hospital capital costs increased on average from $313 to $523. Billions of dollars were used to expand hospitals’ corporate networks. Lutheran General Health Care System, a $600 million conglomerate near Chicago, diversified widely in the 1980s, operating sixty-five subsidiaries, including a nation wide chain of drug and alcohol rehabilitation centers. This aggressive strategy later backfired, forcing officials to reduce the value of their holdings by $103 million. At least $1 billion has been invested in commercial spinoffs. Examples from the 250 hospital IRS forms that The Inquirer examined include auto-leasing companies, book publishers, hotels, laundries, pharmacies, restaurants, parking lots, travel agencies, a duck hunting lodge, and, in the case of the Mayo Clinic, an airport management company. The University of Notre Dame collects more than $1 million a game from NBC to broadcast its home football games. The National Collegiate Athletic Association hauls in more than $70 million for its member colleges from CBS Sports for televising the men’s basketball championship for three weeks. The College Football Association negotiated a $300 million package
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