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Sep 25

Should Non-Taxpaying Hospitals be Able to Gamble With Your Funds?

Should non-taxpaying hospitals, the facilities that prefer to be known by the misnomer “not for profit,” be able to gamble their tax free funds on venture capital investments?

Well, they already are.

An article by Dave Barkholz, “Midsize hospital systems taking the VC plunge,” published earlier this year in Modern Healthcare, featured, among others, the story of Spectrum Health, a not-for-profit health system in Michigan, which created a $100 million venture capital fund to invest in personalized medicine, information technology, population health management and other emerging technologies.

Does anyone else have a problem with this?

These “not for profits,” like other “charitable” non-taxpaying entities, seek your contributions. They escape paying federal and state income taxes. They escape paying property taxes. Yet they seek to profit from speculative investments, investments supported by those who actually pay taxes.

One countervailing factor, though: Spectrum’s CEO made more than $4 million from the health system and related entities during the fiscal year ending in June 2016. I assume he paid his taxes on that.

Just like the “bankers” who caused banks to lose more in the recent recession than banks had make in profit in all of recorded history, there’s a huge asymmetry between non-taxpaying hospital executives pulling out stupid-large compensation and benefits, and now making risky investments, during good times, and expecting donors, both willing and unwilling, to prop them up during bad.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

www.advisorylawgroup.com

 

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