As Columbia/HCA Healthcare Corp. downsizes its hospital operations, some of its facilities may be acquired by not-for-profit hospitals or hospital systems. But outsiders may never find out how much they're being sold for unless Columbia or its not-for-profit buyers volunteer the information.
Under state charity laws, private, not-for-profit corporations, including those that run hospitals, don't have to disclose how they spend their money, with the exception of general revenue and expenditure information filed with the Internal Revenue Service annually.
Consequently, dozens of hospitals worth millions of dollars may change hands without the public ever finding out how their local charitable assets are being spent.
For example, St. Vincent Health System, a Roman Catholic system based in Little Rock, Ark., is buying 248-bed Columbia Doctors Hospital in Little Rock (Nov. 17, p. 4). Terms weren't disclosed.
"The private not-for-profit wouldn't have to disclose because they would be maintaining their charitable intent, which was to have a healthcare facility and maintain a health need in their community," said Cecille Dykas, assistant deputy attorney general in the office of Florida Attorney General Bob Butterworth.
However, state attorneys general may ask for disclosure of a sales price when there is a public outcry. "If you are a not-for-profit hospital, you don't want to alienate your donor base," Dykas said.
More than 20 states have hospital ownership conversion laws on their books, but all restrict their public disclosure requirements to transactions involving a not-for-profit seller. The laws are aimed at ensuring that the public is being fairly compensated for selling its charitable assets to a for-profit corporation.
But there are ways to find out how much not-for-profits are paying for investor-owned hospitals, said attorney Elizabeth Mills with McDermott Will & Emery in Chicago.
For example, not-for-profits may have to disclose the sales prices on a certificate-of-need application, if CON approval is required, she said. Sales prices also may appear on the not-for-profits' annual IRS filings, known as Form 990, she said.
It was Columbia's aggressive hospital acquisition strategy over the past several years that caused leaders of the not-for-profit hospital sector to lobby for such conversion laws.
Those same leaders don't think the same rules should apply when not-for-profits are buying for-profits.
"The sale price of these hospitals is a question of what Columbia is getting for its privately owned assets and not an issue of the community being shortchanged," said Linda Miller, president and executive director of Volunteer Trustees for Not-for-Profit Hospitals.