Elsewhere on this page we publish a letter from the chairman of the Board of Governors of Healthcare Trustees of New York State, Carlos Naudon, responding to our recent editorials in respect of the state ban on for-profit hospitals. Mr. Naudon asks us to consider that New York’s nonprofit hospitals treat uninsured patients every day, providing uncompensated care to the tune of $1.6 billion a year.

This figure, however, is inflated by the hospitals’ practice of charging uninsured patients more than insured ones. “What they will do is take the sticker price of a service – as opposed to what managed care or Blue Cross would get – and say, ‘That’s what we’re giving out in uncompensated care,'” the director of the Center for Medical Progress at the Manhattan Institute, Robert Goldberg, told us. He estimates a 50% markup on average – which means that New York’s nonprofit hospitals are really providing about $1 billion in uncompensated care.

This is admirable work, no doubt, but the figure fails to impress upon us the idea that New York’s nonprofit hospitals are truly charitable institutions, considering that the New York-Presbyterian Hospital System alone takes in annual revenues of $6 billion. Statewide, hospitals’ total operating revenue amounted to $40 billion in 2003, the last year for which numbers are available, according to a spokesman for the Greater New York Hospital Association. Mr. Goldberg told us that hospital revenues “could be as much as $50 billion” today. But even using the older figure, it seems that New York’s nonprofit hospitals devote about 4% of their operating revenue to uncompensated care.

A recent report by the Government Accountability Office, a federal office, found no clear difference between the “community benefit” provided by for-profit and not-for-profit hospitals. The study compared levels of uncompensated care provided by nonprofit, for-profit, and government hospitals in five states: California, Florida, Georgia, Indiana, and Texas. Government hospitals generally devoted substantially larger shares of their patient operating expenses to uncompensated care than did nonprofit and for-profit hospitals.

“Differences between the nonprofit and for-profit groups were often small when compared with the substantial differences between the government group and the other two groups,” the comptroller general, David Walker, recently testified to the House Ways and Means Committee. “Moreover, the burden of uncompensated care costs was not evenly distributed among hospitals, which meant that a small number of nonprofit hospitals accounted for substantially more of the uncompensated care burden than did others receiving the same tax preference.”

In California, for-profit hospitals provided a slightly greater percentage of patient operating expenses to uncompensated care than did nonprofit hospitals. In Florida, the for-profit hospitals provided slightly less. So if there’s a significant benefit from nonprofit hospitals that justifies the ban on for-profit hospitals, it seems to elude the experts.

Then there’s the question of how to justify tax exemptions for nonprofit hospitals, the subject of a recent letter from the chairman of the Senate Finance Committee, Charles Grassley, to 10 hospitals nationwide. If “uncompensated care” is the best answer New York’s hospitals can come up with, well, we hope they have a Form 1120 handy by April 15. That’s the tax form normal taxpaying businesses have to fill out.

Not that we mean to demean the generosity of those who volunteer to serve on the boards of nonprofit hospitals. We don’t disbelieve Mr. Naudon’s contention that hospital trustees “care deeply about the cost of care” in addition to their fiduciary responsibility to the hospital’s bottom line. On the contrary, some of the most admirable people we know serve on the boards of nonprofit hospitals.

We only mean to point out that New Yorkers would be better served if they did not need to rely merely on the generosity of the hospital trustees – but rather benefited from the competitive pressure of the marketplace. That would give trustees no alternative but to compete to offer the lowest costs possible, as they do to offer the highest quality care. This is something up to which members of Congress seem to be awakening.