The hospital industrys split over the reporting of community benefits solidified last week, when the American Hospital Association adopted a stripped-down, modified copy of its rivals public disclosure template.
The AHA and Catholic Health Association disagree over which expenses count toward hospitals aid to communitiesan issue thats become a flashpoint in congressional and regulatory scrutiny of not-for-profit healthcare governance and operations. Not-for-profit hospitals receive tax breaks in exchange for providing loosely defined community benefits and guarantees that any profits go toward operations, not any one individuals personal gain. But concerns of abuse and poor oversight within the sector have triggered federal inquiries and the threat of congressional action.
The separate guides released by two of the industrys powerful trade groups are an apparent effort to pre-empt legislative action by setting a voluntary industry standard. But the split between the AHA and CHA suggests that may not happen anytime soon.
Really, all eyes are on nonprofits, and hospitals in particular, in terms of justifying that they deserve to be tax-exempt, said Thomas Hyatt, a Washington healthcare attorney with Ober, Kaler, Grimes & Shriver.
The one-page disclosure form released by the AHA last week includes two expenses omitted from the CHA template: bad debt, or unpaid bills, and losses from treating patients covered by Medicare, the federal insurer for U.S. elderly. Both the AHA and CHA agree that losses from treating Medicaid patients count as a community benefit.
The Catholic associations five-page form also suggests hospitals itemize spending on other subsidized care as appropriate and asks providers to describe services and needs addressed by aid. Healthcare lawyers noted the pair of forms agree on some key issues, such as the use of costs to report expenses.
And consensus eventually may emerge as hospitals adopt and modify the industrys early standards and as public scrutiny continues, said Gerald Griffith, a Chicago attorney with Jones Day. Its becoming increasingly clear that hospitals have to report what theyre doing, he said. They need to track that with the same vigor as any other numbers, he said. The CHA template appears to go further to address concerns raised by regulators recent inquiries, he said.
Meanwhile, the Healthcare Financial Management Association said it would release its own charity-care and bad-debt accounting and disclosure guidelines Dec. 4.
Not-for-profit health systems are now fine-tuning the guidelines to their needs.
Sutter Health, a 21-hospital not-for-profit health system based in Sacramento, Calif., dropped Medicare losses from its community-benefits expenses in 2006. Meanwhile, 56-hospital Catholic Health Initiativeswhose president and chief executive officer, Kevin Lofton, is chairman-elect of the AHAadded Medicare losses as a footnote to its community benefits in 2005. It will no longer do so, but the expenses will be reported elsewhere, said Peg OKeefe, a spokeswoman for the Denver-based system. Neither system reports bad debt as charity.
Thats not the case at North Shore-Long Island Jewish Health System. The 13-hospital system based in Great Neck, N.Y., includes unpaid bills with losses from free or discounted care. Theres a fine line between bad debt and charity care, said Robert Shapiro, North Shore-Long Islands chief financial officer, echoing the AHA argument that too often patients who dont pay cant pay, but fail to seek aid.
Sen. Chuck Grassley (R-Iowa), who has been highly critical of not-for-profit healthcare operations as Senate Finance Committee chairman, in a statement released Nov. 17 sharply criticized the AHAs inclusion of bad debt in its modified template. Max Baucus (D-Mont.) will succeed Grassley as Senate Finance chairman in January.
AHA Chief Washington Counsel Melinda Hatton called Grassleys statement puzzling. Hospitals should get credit for care provided to needy patients even when they cant collect information necessary to enroll them in charity care programs, she said.