High Cost Of Medical Care 101

By Uncle Hans

Virtually all of America's hospitals are not-for-profit.  This is a tax loop-hole that allows them to not pay income tax.  Well, you say, if they don't make a profit, who cares if they don't pay income taxes?  Most of them DO make a profit, some of them make large profits.

     So how does that work?

     Well, there are several ways to "hide" that profit from the IRS, who overlooks these not-for-profits.  One is to pay your management very,very well.  That is why you find large hospital's CEO's making millions.  CFO's and COO's as well, right on down to department managers if the pie is big enough.  Our dinky little hospital has a management company.  They are smart.  The hospital does well.  They have a bonus clause in the contract, and they get a big bonus if the hospital does well.

      
     We pay them over a million dollars a year to manage a 25 bed hospital....

    The next way to hide the profit is to do as many Americans do, lie on their tax returns.

    The next way to hide their profit is the subject of this blog.  The IRS allows these hospitals to put money "away" each year for a new building or a fancy machine.  It is called funded depreciation and does not go on the books as profit.  Our hospital puts about $100,000 per year away for this.  But there is a catch.  After about 20 years, the IRS demands that you spend the money, and on the designated purpose.  Our management company is smart.  They take good care of our building, which is only 40 years old and remodeled a couple of times.  Really, it's a very nice facility, centrally located in town.

    But these are my new operating rooms, aren't they beautiful?  This week we abandon our hospital, and move into a new hospital on the edge of town. 

     They sold the old building to a nursing home company for $1. ............ The nursing home company  really has no use for it.............

    Your tax dollars at work. Ever wonder why health care is so expensive?

Uncle Hans