An Ohio lawmaker is preparing to introduce state legislation that would require not-for-profit hospitals to provide a certain level of charity care based on the amount hospitals collect in patient revenue.
State Rep. Michael Gilb's proposal calls for hospitals to provide charity care at a rate of at least 4% of what they collect in total patient revenue. A hospital that brings in $100 million in net revenue would be required to provide at least $4 million in charity care. If the proposal becomes law, it could be the first such state law in the country, an American Hospital Association spokesman said.
"Because these institutions are tax-exempt, they have a greater obligation to give something back to the community," said Gilb, a Republican from Findlay, Ohio. "Simply requiring them to set a bare minimum of 4% makes not just common sense but community sense."
The bill is just the latest example of how states are looking at ways to exert more control over hospitals and increase their level of accountability (June 9, p. 6).
Gilb is drafting the proposal and plans to introduce it in the Ohio House sometime this summer, he said. A minimum level of charity care would increase the amount of care for the working poor, single mothers and low-income children, Gilb said.
"Communities benefit more when not-for-profit hospitals do more charitable work," he said. "Since these hospitals have so many financial advantages, Ohioans expect them to provide a great deal of charitable care."
The legislation has hospital administrators wanting to know how charity care will be defined. At some hospitals, charity care reflects only care given to patients unable to pay for services and does not include bad debt from patients with the ability to pay or shortfalls in Medicaid and Medicare payments.
"The devil is in the details," said Scott Malaney, president and chief executive officer of Blanchard Valley Health Association, which operates two hospitals with a total of 192 beds in central Ohio. "What is charity care? There has to be a well-understood definition."
Malaney estimates his hospitals provide about $2 million annually in pure charity care, which would exceed the proposed 4% threshold. The hospitals reported net income of $1.7 million on net revenue of $105 million in 2002.
"The fundamental idea of not-for-profit hospitals justifying their not-for-profit tax status, I don't have any problem with that," he said. "It makes sense to me."
The Ohio Hospital Association has not taken a position on the issue yet but is helping Gilb create a definition for charity care, spokeswoman Mary Yost said. The association is concerned with how to pinpoint a number that captures the right amount of charity care, she said.
"To mandate a certain percentage of charity care for all hospitals we don't think makes the best sense from a public policy view," Yost said. "It creates a lower standard than what many hospitals are already doing."
Hospitals' tax-exempt status should be determined by other factors too, including the acceptance of Medicare and Medicaid cases, the operation of emergency rooms and the public benefits each provides, such as research, she said.
"The charitable mission is broader than the dollar amount," Yost said. "We want to broaden the perspective."