The University of Pittsburgh Medical Center announced today that it will donate up to $100 million over the next decade to fund college scholarships for Pittsburgh public school students. This is a magnificent gesture, but it left me scratching my head: I thought hospitals were supposed to absorb charity, not dole it out.
I already knew that Pitt was doing quite well, thank you. Pitt’s “excess margin” (what the real world calls profit) this year was an eye-popping $618 million on $6.8 billion in revenue. Every day, I admire a stylish half- or full-page ad in the New York Times touting Pitt’s world class programs in everything from rheumatoid arthritis to dementia. This aint cheap: the rack rates for one full-page ad in the Times start at $71K (for educational organizations) and peak at $173K (banks and mutual funds). Even if they get a volume discount (just like Tiffany does for its bauble-of-the-day on page A3), a year of Pitt ads probably runs north of $20 million. I’m guessing that this marketing blitz isn’t designed to attract grandma and her pneumonia from the SNF, or even Uncle Sal’s gall bladder. This is Cleveland Clinic, bring me your transplants and your burr holes, clear the runway for the next Lear Jet, our menus are also available in Arabic kind-of-stuff.
Pitt’s leadership has a long history of “Spend Money to Make Money” strategic thinking. According to a June JAMA article co-written by Pitt’s dean,
In 1986, [University of Pittsburgh Medical Center] invested $230 million to expand the transplantation program and to provide space for its fledgling cancer institute and other research initiatives. By 1988, more than half the world’s liver transplantations were performed in Pittsburgh [emphasis added], generating exceptional clinical revenue…. UPMC’s investment of clinical revenue in transplantation research eventuated in an exponential clinical return, fostering its rapid growth. The heightened research success enhances both the reputation of the parent university and the stature of the hospital system, enabling it to accrue sufficient market share to remain financially successful, even during periods of market instability.
Is there a problem here? Isn’t this a simple case of superb financial stewardship and enviable market share mojo? And, after all, aren’t American non-profit hospitals in trouble for not providing enough “community benefit” to justify their tax-advantaged status?
Sure. And Pitt isn’t the first healthcare organization to expand its notion of charity beyond community health fairs and caring for Medicaid patients. Some organizations – such as Kaiser Permanente – have even established charitable foundations to support their community work. But, to my knowledge, the strategic focus of these foundations has been on improving the health of the community, not on addressing other non-medical social needs.
Why does this rub me the wrong way? Maybe I’m jealous (oh, what we could do with a 9% margin!!!). Maybe I’m wondering whether the organization has fully funded the activities and technologies needed to ensure the delivery of safe, high quality care (CPOE, teamwork training, simulation, adequate nurse staffing, addressing resident fatigue…). And maybe I’m thinking that, in an economically depressed community, jaw-dropping hospital profit margins must be coming from payments by patients, companies, and governments, each of whom may begin to wonder whether they are overpaying the academic Mecca for medical care.
I know it’s time to stop when I start sounding like a Republican.