A report by former Florida Attorney General Robert Butterworth's office is calling for better financial monitoring of the state's not-for-profit hospitals and a system that would require hospitals to provide a certain level of charity care.
The report on Florida hospital financial trends, compiled and released before Butterworth left office late last year, claims not-for-profit hospitals are in a much healthier situation than the hospitals portray. By requiring not-for-profits to reach minimum charity-care levels, "you will see not-for-profit hospitals justifying their tax-exempt status," said John deGroot, legal research coordinator for the attorney general's office under Butterworth and author of the report.
"Some not-for-profit hospitals are registering tremendous profits," deGroot said. "The tax-supported and not-for-profit hospitals in Broward and Miami-Dade (counties) have an unfair competitive advantage. They are driving for-profits out of business."
His two-year study was prompted by the claims of two West Palm Beach hospitals, now known as St. Mary's Medical Center and Good Samaritan Medical Center, that not-for-profit hospitals were suffering serious financial setbacks as a group. The hospitals said their falling revenues were caused by drastic Medicare cuts, declining or late payments from managed-care plans and an increase in uninsured patients.
As attorney general, Butterworth reached an out-of-court settlement in 2001 that prohibited those hospitals' parent, Intracoastal Health Systems, from consolidating acute-care services at Good Samaritan and turning St. Mary's into an outpatient center (March 12, 2001, p. 4). Butterworth had sued Intracoastal to prevent the consolidation. Tenet Healthcare Corp., Santa Barbara, Calif., purchased the two hospitals for $244 million later that year.
According to deGroot's study, the average not-for-profit hospital recorded a 71.3% increase in profits from 1990 through 2001 despite the perceived setbacks.
Hospitals also blamed their financial woes on rising costs of labor and supplies. "It might have given them a bad cold but not a terminal illness," he said.
During the 12-year period, the average daily population of uninsured patients declined 38% at not-for-profit and government-operated hospitals, while for-profit facilities reported a 7% increase, the report said.
In Broward and Miami-Dade counties, for-profit hospitals carried a larger charity-care burden-2.1% of total, or gross, charges-than their not-for-profit counterparts (1.1%) in 2001, he said.
In 2001, hospitals spent $21.5 billion on uncompensated care, or 5.6% of total expenses, according to the American Hospital Association (Feb. 17, p. 4). Uncompensated care is the total of charity care and bad debt, the care for which payment was expected but not received. The AHA does not break out separate charity care and bad debt figures.
The policy of establishing minimum charity-care levels is slowly spreading, as 11 states have established them, according to the National Association of State Charity Officials. Maryland and Rhode Island are setting benchmarks, too.
Lisa McGiffert, senior policy analyst at Consumers Union's regional office in Austin, Texas, said required charity-care levels are needed. The standard in Texas is 4% of net patient revenue. "In states as big as Texas or Florida, benchmarks are the only ways you can measure it," she said.
A spokeswoman for the Florida Hospital Association, which represents 230 hospitals, said the organization is still reviewing the report, which it received in December 2002, and had no comment. Current Attorney General Charlie Crist was not available for comment, and a spokeswoman did not return messages.