The General Accounting Office, which earlier this month issued a report that found few significant problems with 14 not-for-profit hospital conversions, is set to start a new review that will include a look at whether charity care dropped after the sales, MODERN HEALTHCARE has learned.
Meanwhile, Rep. Pete Stark (D-Calif.), who requested the first GAO conversion study and has called for the second GAO analysis, plans to ask federal investigators to review at least two of the conversions studied by the GAO in much more detail.
What laws or regulations the transactions may have run afoul of was unclear. An aide to Stark did not reveal which transactions would be highlighted, saying only that the deals looked "suspicious." The aide said a letter detailing Stark's suspicions would be sent to federal authorities early this week.
Thomas Scully, president of the Federation of American Health Systems, which represents for-profit hospitals, called the first report "surprisingly objective and fair." It concluded that the for-profit buyers in most of the 14 transactions paid fair-market value or more for the not-for-profits that they bought (Jan. 12, p. 17).
Scully was critical of Stark's decision to ask the GAO and other federal agencies to take another look.
"I like Pete Stark, but this is an outrageous abuse of the GAO's investigative authority by Congress," he said.
Scully said that when the GAO first undertook its review he asked several federation members to cooperate.
"This doesn't encourage me to get my members to work with the GAO on future studies," Scully said.
The follow-up study is likely to focus on charity care before and after a hospital was converted to a for-profit.
The study could have implications beyond the conversion issue.
Next year Congress may consider an overhaul of the tax system, with the not-for-profit status of hospitals under review as part of that debate. Traditionally, charity care has been held out as a primary justification for the tax-exempt status of hospitals.
"In the context of tax reform, this study could have huge implications for every tax-exempt facility," said Frederick Graefe, a partner with Baker & Hostetler in Washington.