A national taxpayer watchdog group has joined the debate over whether not-for-profit hospitals deserve the billions of dollars in tax breaks they receive.
The group, Citizens Against Government Waste, looked at several not-for-profit hospitals in the Washington area and in a report released earlier this month found widely varying degrees of charity care, despite huge accumulated earnings by these facilities.
The report came on the heels of a poll commissioned by a small coalition of not-for-profit hospitals that showed most District of Columbia residents are concerned about the ramifications of for-profit takeovers of hospitals (March 23, p. 17).
Because not-for-profit hospitals make money and pay their chief executive officers handsomely, the report "reveals little difference between taxpaying and tax-exempt hospitals, except that one group pays taxes and the other does not.
"Before citizens rise in indignation over a for-profit hospital moving into their community, they must understand the nostalgic image of `charity' at hospitals is no longer relevant in an age of massive government and private insurance support," the report said.
What communities get in exchange for giving hospitals tax breaks is a hot-button issue. Already, at least eight states have community benefit reporting laws, and California earlier this month released the first report on its law, which went into effect in 1995 (March 23, p. 17).
The Washington-based watchdog group looked at charity care as a percentage of a hospital's fund balance, or the wealth it has built up over time, plus investments, such as stocks and bonds. The group relied on federal tax filings required by all not-for-profits, as well as annual reports.
According to the group's findings, 250-bed Suburban Hospital in Bethesda, Md., had the lowest percentage of charity care with just 0.7%, despite a fund balance and investments totaling almost $160 million.
But a Suburban Hospital official took issue with how the watchdog group calculated its charity care.
"I have never even heard of anyone looking at it the way you described," said Richard Jones, the hospital's senior vice president for finance.
Jones said charity care, which includes uncompensated care, is most commonly expressed as a percentage of net revenues. Based on that, Jones said, Suburban Hospital's charity care last year was 4.9% on net revenues of almost $120 million.
But Elizabeth Wright, director of the watchdog group's health and science division, defended the analysis. She said the group intended to look at charity care as a percentage of a hospital's wealth.
On the flip side, Wright's report said those hospitals with the highest percentage of charity care-27%-were 772-bed Washington Hospital Center and 167-bed Children's National Medical Center, both in the District of Columbia.
"Citizens in their towns have to make sure their local hospital is returning something back to their community," Wright said.