California has just signed off on a deal that would allow a hedge fund to snap up six non-profit hospitals.
Non-profit hospitals could be going the way of the dinosaur.
It’s perhaps not hard to see why in an industry with such immense profits. As we reported recently, California Attorney General Kamala Harris just signed off on conditional approval for BlueMountain Capital Management — a hedge fund — to invest in Daughters of Charity Health System. It will come with conditions, namely that it must keep up the charitable efforts and must keep at least five of the six hospitals open for 10 years, but it marks a worrying trend for those who want to keep non-profit hospitals functioning and serving needy individuals rather than being obsessed with the bottom line, as hedge funds are.
And it’s big money involved — last year, another hedge fund bid $843 million for the struggling hospital chain, before it pulled out due to the state’s restrictions on how it could be run.
There are a lot of things working against non-profit and not-for-profit hospitals. One development is the possibility of not-for-profit hospitals losing their tax exemption, if the courts see it operating like a for-profit business. It happened to Atlantic Health System in New Jersey, and comes as a result of greater scrutiny on not-for-profit hospitals. Whether that’s a good thing or a bad thing is up for debate, but it certainly could spell trouble for a lot of non-profit hospitals across the country, according to a Modern Healthcare report.
Also, low discount rates are making it tough for non-profit hospitals to fund pension plans, based on a report from Standard and Poor’s a couple years ago. Low rates are causing non-profit hospitals to take a beating financially, as it forces the organizations to put more contributions into a plan, according to a Health Leaders Media report.
There will likely always be a place for non-profit hospitals, but as the recent deal in California shows, they can always head to the private sector if trouble shows up.