Arnold Ventures' Hospital Targeting: A Misguided Misinformation Campaign

Arnold Ventures, a private LLC backed by hedge fund billionaires John and Laura Arnold, has been waging a misinformation campaign targeting hospitals, claiming to reduce health care costs for everyday Americans, employers, and taxpayers. While their intentions may seem noble, their approach is flawed and misguided. As representatives of hospitals across the country, we strongly discourage anyone from taking seriously their flawed conclusions and inaccurate narrative.

Arnold Ventures has been pumping more than $100 million into think tanks, academics, public speaking sponsorships, political activities, and encouraging advocates to drive a wedge between different hospitals to advance their policy agenda at the state and national levels. However, their strategy is based on a flawed understanding of the unique challenges faced by different hospitals and the complex nature of the health care system.

First and foremost, Arnold Ventures' recent piece published by Third Way compares hospitals located in two entirely different communities, treating different patient populations, and facing very unique challenges. Hospitals and health systems are not monolithic in the services they offer or how they operate. Each hospital encounters different patient barriers to care, such as inadequate transportation, health literacy and cultural barriers, different levels of insurance coverage, and health conditions that require their own care interventions. The authors completely ignore these realities.

Moreover, a hospital that cares for higher proportions of Medicare and Medicaid patients may face more financial challenges due to chronic underpayments from government payers. According to the government's own data via the Medicare Payment Advisory Commission (MedPAC), hospitals' Medicare margins for inpatient care in 2022 were negative 11.6%. This means hospitals lost $100 billion by providing care to Medicare patients. Collective underpayments from Medicare and Medicaid totaled over half a trillion dollars between 2018 and 2022. The truth is that hospitals are the only place in a community that serves all patients and provides many of the essential services that make up our health care safety net in this country. They do this despite incurring losses, often even after accounting for higher commercial insurer reimbursement rates.

The authors also make an illogical conclusion that the concept of "breaking even" is a sign of good financial management. This is simply not true. No organization in any field can operate by simply breaking even. This is particularly true for hospitals and health systems, where maintaining a positive margin is critical to ensuring they can withstand operational disruption or unexpected financial distress, as well as maintain the safety of their physical infrastructure and adapt it to rapidly changing clinical protocols that may require technological and other upgrades.

Arnold Ventures' misinformation campaign is based on flawed data and methodologies, such as the National Academy for State Health Policy (NASHP) Hospital Cost Tool that inflates hospitals' margins by both undercounting hospital costs and incorrectly counting hospital revenue. This tool fails to include any costs that are not assigned to the hospital's license, such as physicians, behavioral health, post-acute, and ambulance services. Imagine the kind of care a hospital would provide if these services were not covered. Not only would that not be a hospital that anyone would want for their community, but such a hospital would very likely cease to exist.

In conclusion, we strongly discourage anyone from taking seriously the Arnold Ventures misinformation campaign and the flawed conclusions in their recent report. Hospitals stand together because every hospital recognizes that their 24/7 existence is essential to the health and well-being of the communities they serve. This is particularly important for hospitals because they are the only part of the health care system with this existential responsibility.

Molly Smith is AHA’s group vice president for public policy. Bharath Krishnamurthy is AHA’s director, health analytics & policy.