Nonprofits, For-Profits: Who Cares?

A friend of mine with a long and distinguished career in health care and academics believes it is wrong to allow for-profit companies to provide health care services. The profit motive corrupts absolutely, he says, and compromises the ethical dimensions of what is, in the final analysis, a social good.

I was thinking about this not long ago when I found myself in a multi-million dollar house sitting on 10 acres in north Scottsdale. The owner, who also had other properties scattered across the United States, made his fortune in the nursing home business. After grousing about declining Medicaid and Medicare reimbursement rates, he admitted that he wasn’t doing too badly.

My friend has a point about the intrusion of the “corruptible sector” into health care, which is one
slice of the larger trend of for-profit groups moving into traditional nonprofit work generally. As
health care and other human services are reduced to commodities, the values of the marketplace crowd
out the values of community. When margin comes before mission, there are no limits on the former, and
no moral sustenance for the latter.

For my tastes, however, I think we make too much of the distinction between nonprofits and for-profits.
Were I to venture a guess about some distant future, I would predict that the distinction will become
operationally, if not legally, meaningless.

As the CEO of a “health conversion” foundation, I spend a fair amount of time talking with my trustees
and community members about terms like ‘accountability,’ ‘public interest,’ and the laws governing such
things. My Board wants to know not only what is legally permissible for our organization to carry out its
mission, but also what is the “right thing to do” given our genesis from a hospital system to a public
charity. The spurious conflation of the legal with the ethical is often reduced to a sidebar in the more
immediate discussion of how we can be most effective in being a “catalyst for community health,” a
statement of intent that we take seriously.

Along those lines, the first thing we do is look at the outcome we hope to achieve and then consider
what relationships with other groups – nonprofit and for-profit alike – might get the best results. We
judge these groups on the basis of their track records, their reputation, and the political and social
exigencies of the moment. As it turns out, tax status is not always the defining element.

No one holds a monopoly on ethics, and certainly not on good judgment. It’s just as easy to grease
the palm in a nonprofit organization as it is in a for-profit, and to wear a sackcloth in either. I
once recommended a grant to a nonprofit organization working with inner-city youth whose executive
director bought a Jaguar car with the money and skipped town. Another organization used its grant
to hire a private contractor for a drug therapy program whose directors were paid obscene fees for
zero work.

It wasn’t the tax status that tripped me up, but poor judgment, lack of credible information, glib
talk and the usual quotidian distractions of life. Over the years, I’ve learned to worry less about
legal and organizational distinctions. They matter, but not in the final ambiguity and irony of
human affairs. Basically, I’d do business with the Devil himself if I thought he was in a weak moment
when he might actually consider doing some good somewhere.

Today, our foundation continues its nonprofit history of addressing the health needs of the
community, while the hospital system we formally owned continues to provide health care services
under its for-profit owners. As far as I can tell, they are doing a good job of it, as are other
for-profit and nonprofit hospitals systems across the Phoenix metro area. What separates some of these
institutions is not the profit motive, but how that motive is embedded in the community through a
web of reciprocity that counts a social return on investment not reducible to dollars alone.

The best of these institutions do well by doing good, and they are nonprofits and for-profits alike.

Feedback? Send it my way: Roger.Hughes@slhi.org.
*The Drift reflects the views of the author, and does not represent the official view of SLHI’s Board of Trustees and staff.