Think of healthcare like football, specifically the Green Bay Packers.
The Packers are owned by 110,000 fans from around Wisconsin and the nation-not to mention Guam and the U.S. Virgin Islands-who hold stock in the championship football club.
Ownership by the fans has afforded the team a measure of local support and accountability.
That public accountability is what Allen Herkimer Jr., a retired healthcare executive and professor, wants to see in America's health systems.
To get there, Herkimer suggests scrapping health systems' not-for-profit and for-profit tax distinctions.
"It is this writer's proposal that all of them shed their not-for-profit and for-profit cloak and create a new tax structure for all the nation's healthcare systems," writes Herkimer, of Corpus Christi, Texas, in a recent issue of Rate Controls, a twice monthly publication that follows trends in American healthcare. Rate Controls is published by R-C Publications in Phoenix.
In a June 15 article, Herkimer suggests classifying all health systems as Community Service Corporations, or CSCs. Herkimer started writing about the idea in 1986, Rate Controls says.
"It's a misnomer to identify hospitals as for-profit or not-for-profit," Herkimer says. "We're in it for profit, or else we can't live."
But some tax attorneys say doing away with the not-for-profit and for-profit labels misses a fundamental reason for the tax distinction.
A for-profit system is organized to deliver returns to investors, while a not-for-profit system generates revenues to give care and services to a community, says attorney T. J. Sullivan, of Gardner Carton & Douglas in Washington.
"I think the distinction is a venerable one," Sullivan says.
Reducing the not-for-profit and for-profit labels to meaning only whether an organization pays taxes is too simplistic, says tax attorney Thomas Hyatt, of Ober Kaler Grimes & Shriver in Washington.
"I think operated correctly, the nonprofit tax-exempt model-as it has been developed over the years-ensures responsiveness to the community," Hyatt says.
Community responsiveness is what Herkimer is after.
The CSCs would pay real estate and income taxes, but they could exchange some of their tax bills for free healthcare services to the community.
"My idea was to build a little bit more of an attachment to the community they're in," says Herkimer, a member of the American College of Healthcare Executives.
Like the Green Bay Packers, the CSCs would issue common stock to raise money.
As part of the deal, local residents would have to own at least 51% of any common stock sold in a CSC.
"Public ownership and accountability will make management genuinely attentive, supportive and responsive to the community's healthcare needs," writes Herkimer, a retired professor of health administration from Southwest Texas State University in San Marcos. Herkimer now runs a hospital consulting business.
But unlike the Packers' stock, stock issued by CSCs would pay dividends.
People who own stock in the Packers are never paid a dividend, and the value of their stock never increases.
During the Packer's 79-year history, the club has had four stock offerings, with the most recent one ending in March. It raised $24 million with each share selling for $200.
A Packer fan isn't allowed to own more than 200,000 shares, so no one can take control of the club. The almost 110,000 fans who own a stake in the team lay claim to more than 4.7 million shares of stock.
"It entitles you to attend the annual shareholders meeting and express your views on any issue," says Lee Remmel, executive director of public relations.
But healthcare is a whole different ballgame.
The growth of both for-profit and not-for-profit systems as multimillion-dollar businesses has muddied people's perceptions of hospitals' motives.
Now more than ever, not-for-profit hospitals are having to justify to their communities why they deserve the tax breaks they historically have enjoyed (Jan. 26, p. 44).
"What is at stake is not whether healthcare organizations should or should not generate a profit, but whether they should pay taxes," Herkimer writes.
The benefits of a CSC, Herkimer says, would be many:
CSC board members, including local residents, would have a vested interest in the corporation. That way, being a board member would not be an honorary or social appointment, but one with fiduciary responsibility.
Paying real estate taxes might deter overbuilding.
Since a CSC would sell stock, it would have to report to the Securities and Exchange Commission, thereby ensuring further public accountability.