A finance committee in Florida's Legislature has approved a bill that would require all not-for-profit hospitals to spend at least 3.7% of their patient revenues on charity care and bad debt.
That's the average that Florida for-profit hospitals spend on charity care and bad debt.
The bill was proposed by the Florida Senate's committee on finance, taxation and claims. Some 124 of Florida's 316 hospitals are not-for-profit institutions.
According to an analysis of the committee's plan, as many as 18 not-for-profit providers could lose their state sales tax exemption if the bill becomes law. That could cost the 12 acute-care and six specialty hospitals as much as Tax issues
$12.7 million in new taxes.
Overall, Florida not-for-profit hospitals receive an estimated $160 million in annual tax-exempt benefits, excluding the lower interest rates they pay because they can issue tax-exempt bonds.
The proposed bill wouldn't subject not-for-profit hospitals to the new standard until 1996, a committee spokesman said.
If the law's approved, Florida would become the second state in the nation to mandate levels of charity care. Last year, Texas approved a bill that requires hospitals to provide charity care or Medicaid shortfalls equal to 4% of net revenue.
Unlike Florida's proposal, the Texas law allows hospitals to qualify for tax exemptions by providing community benefits that are equal to 5% of net patient revenues. Of that amount, 3% must be in charity care or Medicaid shortfalls.
The Florida Hospital Association opposes Florida's bill because it doesn't consider community benefits or Medicaid shortfalls in setting qualifications for tax exemptions, an FHA spokesman said. For that reason, the proposed bill would be more stringent than the new Texas law, said Bill Bell, FHA's general counsel.
Last December, the FHA created a community benefits task force to develop methods for hospitals to assess and document a wide spectrum of community benefits, including charity care, subsidized services to the poor and costs of research and education.
The FHA also plans to submit its recommendation for a standard that can more adequately measure not-for-profit tax exemptions, Mr. Bell said.
Florida's current sales tax exemption is based on a longstanding formula that uses a ratio of charity-care days and Medicaid days to total days. Currently, all not-for-profit hospitals in the state pass that standard.
But state Sen. Alberto Gutman, a Republican representing Miami, said the standard is antiquated and that some not-for-profit hospitals aren't providing as much charity care as for-profit hospitals (Feb. 7, p. 18).
A study commissioned by Mr. Gutman found that the 82 not-for-profit hospitals in the study spent an average of 6.1% of their patient revenues on unsponsored care in 1992, compared with 3.7% spent by the 77 for-profit hospitals in the study.
Twelve of the 82 not-for-profits, or about 15%, spent less than 3.7% on unsponsored care, while 23 of the 77 for-profits, or about 30%, spent more than 3.7% on unsponsored care.
Hospitals in Florida had an average total margin of 3.5% in 1991, compared with the national average of 3.9%, according to the state Agency for Health Care Administration. Margin figures by ownership status weren't available.
The tax-exemption issue in Florida received wide publicity last fall when Columbia/HCA Healthcare Corp., then Columbia Healthcare Corp., suggested that state laws governing tax exemptions should be reconsidered because some not-for-profit hospitals provide insufficient levels of charity care (Nov. 1, 1993, p. 3).
Louisville, Ky.-based Columbia operates 45, or about 20%, of the hospitals in Florida.