The WSJ article is incredibly misleading. Most nonprofit hospitals are taking a bath on patient care.

Making generalizations about nonprofit hospitals by highlighting the most prosperous 1% is like extrapolating average height by looking at a basketball team.

You're right. The majority of non-profit hospitals are struggling. But the biggest among them do quite well, thank you. I'm familiar with the Northwestern/Cook County disparities from my years in Chicago and wanted to highlight that aspect of the story.

I am shocked that the WSJ would publish such a blatantly misleading article. Giving raw net income figures is meaningless. What was the operating margin? How much of the profit of these hospitals came from investment income?

The WSJ of all people should understand the requirements for organizations such as not-for-profit hospitals to maintain credit ratings in order to have access to capital. My bet is that even these top performers are only showing adequate performance for the bond market. Most hospitals don't come close to generating the profit margins or days cash on hand that the bond market views as needed to be declared as top ranked investments.

What kind of operating margins are needed to provide the capital to maintain the level of care that the public expects? I would argue that for most hospitals and systems it is in the 3-5% range, year in and year out. Yet most hospitals in this country are not performing at that level. A large percentage are relying on investment income to stay in the black.

I also take great exception at this notion that the justification for not-for-profit tax status is based upon community benefit based upon charity care. Charity care is only a small fraction of the community benefit a hospital provides. The primary community benefit that a hospital provides is medical care to the community.

What we have said as a society is that we would rather that the money made by a hospital remain in our community for the use by the hospital to provide medical services to us, rather than sending 30-40% of the money the hospital makes to Washington and state governments to build fighter planes, roads, etc.

The final point is that the WSJ should be sophisticated enough to understand that there is a fundamental difference between a not-for-profit and a for-profit business. And it is not charity care.

For-profit businesses have an ultimate purpose of generating a financial return on the investment of the owners. The mission of the organization is the means to that end.

Not-for-profit businesses have an ultimate purpose of meeting a societal need, their mission. They make money as a means to that end. They can obtain the funds to support their mission through donations, investments or profit generating services. For community hospitals donations and investment income are important, but completely insufficient to fund the mission of the organization. Profit generation is absolutely necessary. And it needs to be at a level to adequately fund the current operations, support needed future growth of services, provide needed capital for new and replacement facilities and equipment, and have sufficient reserves to maintain access to credit markets.

When a not-for-profit hospital sets a required profit level as the University of Virginia Health System did that affects staffing ratios, overtime by residents and level of care provided to patients such as refusing to individualize outpatient surgery protocols to medical needs, it is hard to see how it is functioning as a non-profit.

In fact the Virginia Supreme Court just ruled that the the doctors group at UVA is not immmune to malpractice suits because the level of charity care provided is too small to qualify as a charity.

It isn't just billing people without insurance at higher rates and using collection agencies that is affected by the profit seeking, it's every patient's quality of care and the working conditions of doctors and nurses and other staff.