In 1751, one year before he flew his famous kite, Benjamin Franklin cemented a cornerstone of American healthcare in Philadelphia.
He and physician friend Thomas Bond founded Pennsylvania Hospital and dedicated it to caring for the indigent and the insane. Wealthy patients, who typically were treated in their homes by physicians, were admitted to the colonial hospital only if there was room and they paid more to subsidize the penniless.
With the biblical story of the good Samaritan as its guiding principle, Pennsylvania Hospital was part of a new era of social responsibility in medicine.
Fast-forward 247 years and see how the face of American healthcare is greatly changed. These days, the do-good mission of hospitals isn't always so obvious.
Blurred focus. The onslaught of for-profit healthcare has blurred those lines, and hospitals of all financial persuasions have become multimillion-dollar businesses entangled in government regulations and insurance red tape.
Over time, as hospitals behaved more like big businesses, the idea that they were there to serve their communities sometimes was blurred.
Take, for example, a public opinion poll the Hospital and Healthsystem Association of Pennsylvania commissioned last year.
A survey of 718 residents found more than two-thirds of them believed all Pennsylvania hospitals were run as for-profit businesses.
That's a startling discovery when you consider only two of Pennsylvania's 225 hospitals are actually for-profit.
"We took that as a wake-up call," says David Myers, vice president of healthcare finance and research for the Pennsylvania association.
To combat these muddied perceptions, hospitals, their state associations and the American Hospital Association have begun quantifying the contributions hospitals make in their communities. That means tallying everything from the jobs they create to the charity care they give to the public health they nurture.
Gone are the days when hospitals could rely solely on people accepting the notion that hospital is a word synonymous with charity.
In some states, the chore of quantifying community benefits has been a matter of financial life or death.
Some municipalities and politicians have challenged the financial breaks many hospitals receive as tax-exempt organizations. They're questioning whether the benefits those hospitals provide outweigh letting them off the hook for millions of dollars in property taxes.
Benefit bandwagon. Pennsylvania is one of those states on the community-benefit bandwagon. It has to be.
In recent years, hospitals in more than two-thirds of Pennsylvania's 67 counties have come under attack by municipalities and school boards that want to see hospitals stripped of their tax-exempt status and forced to pay property taxes.
But a new law passed late last year could put the issue to rest. The legislation clarifies five public service guidelines a hospital must meet to qualify for tax-exempt status. However, opponents of the new law want it struck down and are challenging it in court (Jan. 19, p. 14).
Among the most critical is a provision spelling out levels of uncompensated services. Such services must equal at least 75% of net operating income but no less than 3% of total operating expenses (Dec. 1, 1997, p. 5).
The Pennsylvania hospital association was a driving force behind the move for more specific criteria.
Before the new law was passed, some Pennsylvania lower courts had ruled against hospitals, saying they didn't deserve their tax exemptions because they failed to provide enough charity care, didn't operate free of a profit motive or owned physician practices.
All that opposition has kept the state hospital association actively tallying community benefits.
It keeps tabs on uncompensated care ($657 million in 1996), and in 1994 it put out a 93-page report listing a slew of hospital community service programs. Those ranged from helping seniors file tax returns to doing health screenings and making donations to homeless shelters.
Such efforts at documentation are proof that as the healthcare industry has changed, so too have hospitals, which now must reach beyond the confines of inpatient care.
For example, in Pennsylvania, almost 90 community health improvement projects are in place.
Hospitals and local groups are working together to improve the health of their communities by tackling such issues as teen pregnancy, smoking and violence.
"It's as much a way of improving public health and rebuilding the community as it is dealing with traditional healthcare," says Myers of the state health association.
The situation is similar in nearby Ohio.
The Greater Cincinnati Health Council has a 34-member Community Benefits Task Force that's doing an inventory of hospital programs.
"We want to make sure that we are performing different community services, that they really do make a difference," says Nancy Strassel, vice president of the health council.
The Massachusetts example. In the early 1990s, the Massachusetts Hospital Association undertook an extensive inventory of the array of community benefit programs offered by its hospitals, such as prevention, substance abuse and AIDS treatment programs.
At the time, government leaders had begun questioning what hospitals were doing for their communities.
"The '90s really began an era of accountability," says Andrew Dreyfus, senior vice president of public advocacy and policy for the state association.
Dreyfus says the demand for accountability happened because hospitals had been forced to become more businesslike during the 1970s and 1980s. The corporate mind-set grew out of the introduction of the Medicare prospective payment system, the early seeds of managed care and other demands by insurers to be more efficient.
As hospitals grew in size and scope and formed systems, their boards and trustees also demanded that they behave more like businesses.
To get a better handle on hospitals' social contributions, the Massachusetts attorney general devised a plan in 1994 to establish guidelines that would put a price tag on community benefits from hospitals.
The first report came out late last year, and it valued at $287 million the community services and unreimbursed care given by Massachusetts' 75 acute-care hospitals in 1995.
When Attorney General Scott Harshbarger started the initiative, Massachusetts had no for-profit hospitals, but since then there have been two for-profit conversions. Harshbarger now has made valuing community benefits a prerequisite of for-profit conversions.
The push for accountability is moving one step further. The Massachusetts Hospital Association is putting together what it believes could be the first statewide report that compiles patients' evaluations of their hospital stays.
States' concern grows. In recent years, a number of states have required community benefit reporting because there was some concern that hospitals weren't doing enough.
According to the Catholic Health Association, eight states have such requirements: California, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, Texas and Utah.
Utah was among the first to establish such a measure. In 1990 it required hospitals to provide the community with charitable gifts, such as indigent care, community education, medical discounts, and donations of time and money.
Indiana passed a measure in 1994 requiring the state's not-for-profit and nongovernmental hospitals to conduct needs assessments in their communities. They also have to file annual reports with the state detailing what's being done to address some of those needs-including indigent care, cardiac rehabilitation, rural health clinics, and programs targeting teen pregnancy and smoking.
"The impetus was, `How are you going to prove you're worthy of your tax exemption?'*" says Spencer Grover, a vice president of the Indiana Hospital and Health Association. Grover says Indiana has about 138 hospitals, about 63 of which are not-for-profit.
He says Indiana's law was based on one passed in Texas in 1993.
Although both states require hospitals to report community benefits to the state, the Texas law goes a step further.
Among its requirements is that hospitals devote 4% of their net patient revenues to charity care. The state also requires that hospitals report their actual charity-care costs, as opposed to charity-care charges, says Charles Bailey, general counsel for the Texas Hospital Association. Charges are what hospitals expect to collect from payers; costs are what they actually spend to provide the care.
The Texas Department of Health, however, also keeps track of charity-care charges for all hospitals, regardless of their ownership status. In both 1995 and 1994, Texas hospitals had charity-care charges of $1.8 billion, an increase from $1.5 billion in 1993.
Bailey says Texas also recently revised its law to require that public hospitals, along with not-for-profits, report their community benefits to the state. But for-profit, investor-owned hospitals still aren't included.
"It is a double standard," Bailey says of the for-profits. "But from their perspective, they also do not benefit from a tax exemption. Requiring them to classify patients as charity vs. bad debt is an increased cost to business, and what is the benefit to them to do that?"
Bailey says the state has 503 hospitals, both acute-care and specialty. Of those about 206 are investor-owned.
Another provision in Texas law is that hospitals do a community needs assessments and draw up hospital budgets to meet the demand.
That focus on documentation has forced some hospitals to change how they deliver care by reaching out into the community, rather than just waiting for people to come through their doors.
It's an evolution that should benefit hospitals in the long run.
"The payment system has changed, and as we move to capitation, keeping people healthy is important," Bailey says.
Florida's uphill battle. Gauging community benefits is something Florida has tussled with a few times in the past 20 years, says Bill Bell, general counsel for the Florida Hospital Association.
During the 1970s a state legislator tried to affix a number to the amount of charity care a hospital would have to provide to qualify for a state sales tax exemption.
The issue came and went.
It wasn't until the 1980s that the state Department of Revenue passed a rule that 2.5% of a hospital's inpatient days must be used for Medicaid or free care if the hospital wants to keep its sales tax exemption, Bell says.
During the early 1990s-at a time when other states were passing legislation to measure community benefits to qualify for property tax exemptions-the Florida association put together a task force. That way if the issue surfaced there, they would be ready.
In October 1994 the task force put out a 41-page report to help hospitals concretely measure what they are doing for their communities. It also included case studies of some ongoing efforts such as mobile clinics, childhood immunization projects and indigent-care programs.
"Hospitals should begin now to design and address community needs and to implement new community benefit programs," the report said. "Hospitals must document and quantify those community benefits."
The exercise is touted as a way to survive the healthcare changes of the time, including shrinking inpatient stays, increasing competition and demands from the public that outcomes data be made available.
"The community hospital, whether it's a not-for-profit hospital or a public hospital or an investor-owned hospital, is serving the community," Bell says.
Positive spin? Despite the industry's best efforts and intervention by some states, the public remains unconvinced about hospitals.
According to focus groups and polls conducted by the AHA about a year ago, consumers think hospitals are more interested in profits than they are in patients (Jan. 13, 1997, p. 3).
The AHA responded by working with state hospital associations to help local hospitals better inform the public about their community benefits.
Sharon Schur, president of the Tampa Bay (Fla.) Hospital Association, says hospitals' efforts to document their benefits haven't been easy. That's because they've had to contend with the government's crackdown on hospital billing fraud and abuse.
"I think it's caused the public to lose sight of the hospital's business, which is taking care of patients, whether they are for-profit or not-for-profit," Schur says.