Non-profit hospitals’ status raises questions

Once again the California Hospital Association is mounting a crusade that the survival of the multibillion-dollar California hospital industry is in grave jeopardy.

The threat? Earthquakes? Climate change? Godzilla? Not exactly. The big threat is AB 503, a bill that would let the public know whether non-profit hospital corporations justify their enormously profitable tax-exempt status by providing sufficient charity care and community benefits.

In a recent Capitol Weekly column the head of the lobbying arm for the well-heeled California hospital industry wrote that AB 503 “is a solution in search of a problem that doesn’t exist.”

Apparently they forgot to tell the California State Auditor and the California Legislative Analyst Office, both who have separately observed that a problem, in fact, does exist.

ab 503In 2012, for example, the Legislative Analyst noted there is “no federal, state, or local requirement on the amount of charity care that nonprofit California hospitals must provide in order to maintain their non-profit and tax exempt status.”

That same year the State Auditor issued its second report in five years recommending the legislature amend state law to include requirements for the amounts of community benefits non-profits should provide and define a methodology for setting uniform standards.

As Principal Auditor Grant Parks put it more colorfully in a legislative hearing in 2012, state law on what counts as community benefit is “fairly permissive… it’s like the Wild West of what is required.”

AB 503 is a response to those recommendations. It would clearly define what charity care is – the direct provision of care to the uninsured and under insured. And what it is not – for example, declaring a “loss” on payments it did not collect for wildly inflated charges in a state where hospitals, on average, set their charges at four and a half times their costs.

Community benefit programs under AB 503 must go to actual health improvement programs, such as vaccinations for low-income families, chronic illness prevention, and school based health centers. Marketing and promotional activities, like handing out headbands and water bottles with your corporate logo at 10k races, or sponsorship of sports teams and events, would not qualify as a “community benefit.”

AB 503 also would improve reporting requirements on how and if the non-profit giants are really meeting their charity care and community benefit moral imperative. Maybe that’s why they are in such a panic over the bill.

Or maybe the hospital industry executives are just embarrassed that for-profit hospitals, which also provide charity care, do not get the same lucrative tax-exempt gift handed to non-profit hospitals.

A 2012 California Nurses Association research study found that non-profit California hospitals piled up $1.8 billion in taxpayer funded subsidies beyond what they return to communities in charity care the prior year.

Or the fact that 100 non-profit hospital executives collect compensation packages of over $1 million each, as the CNA report also disclosed.

While a few small independent hospitals remain, many of which are exempted by AB 503, California’s hospital scene today is dominated by giant corporate chains who account for the $5.8 billion in profits California hospitals record in 2012 alone.

With all that cash on hand, is it really too much to ask that they stop hiding what they count as charity care and community benefit, that all hospitals be held to the same standard, and that the public has a right to know how their tax dollars are being used?

The hospital industry lobbyists insist they are more than living up to their obligation. If that’s the case, increased public transparency and consistency in reporting should hardly be a cause for all the fuss.

Ed’s Note: Deborah Burger is a registered nurse and co-president of the California Nurses Association/National Nurses United.