A Senate roundtable convened last week by influential Sen. Chuck Grassley may have provided hospital representatives with a soapbox for their opinions on the hot-button issue of community benefit, but may have done little to steer the senator away from a potential legislative fix.
Hospital executives, trade groups and various health policy shapers last week told the Iowa Republican, who is the ranking member of Senate Finance Committee, and committee staffers that a draft report aimed at more narrowly defining community benefitwhile good in theorynevertheless needs more work before going into practice.
Earlier this year, committee members hashed out a blueprint for potential legislation requiring not-for-profit hospitals to develop and publicize their charity-care policy, provide a quantitative amount of annual charity carewith a minimum of 5% of a hospitals annual patient operating expenses or revenue going to such careand to routinely gauge whether they are serving their communitys core needs.
Grassley said he was still undecided about legislation, adding that he favors an industry fix rather than a congressional one. My hope remains that much can be accomplished with volunteer work, he said, singling out efforts by the Catholic Health Association as particularly praiseworthy. The question is, can they bring along all the nonprofit hospitals to do the right thing? I am very worried that the answer may be no.
Roundtable participant David Benfer, president and chief executive officer of St. Raphael Healthcare System in New Haven, Conn., called the report well-intentioned, but nevertheless said its tenets would not work for his hospital and others. First, prioritizing charity care over other community benefit, and granting (a more favorable tax) status for the former but not the latter, is wrong, Benfer said during the discussion. Our outreach, prevention, education and research programs are, in my view, even more important than charity care. He went on to say that the drafts one-size-fits-all, quota system would ultimately undervalue low-cost services that otherwise make a big impact at the community level.
Some of our primary-care and prevention services to the uninsured keep persons well and in the workforce, and children in school, thereby avoiding the need for charity care, Benfer said.
But other not-for-profit hospital systems may not be as proactive or open, and Grassley and his staff have made it clear that hospitals trying to game the system would be punished. Government auditors estimate that not-for-profits receive up to $20 billion a year in benefits from tax-exemption at the federal, state and local level, yet some hospitals have been hard-pressed to show what they are doing in order to receive that tax break.
Grassley has threatened legislation that would require not-for-profit hospitals to more explicitly define the services they offer to low-income patients and the community at large, but has stopped short of doing so, opting instead to have hospitalswith a nudge from the Internal Revenue Servicedraft internal regulations.
The American Hospital Association has been lobbying members of Congress to delay the IRS new Form 990especially in regards to Schedule H, which requires hospitals to report community benefitsuntil tax year 2010 rather than 2008 (Oct. 15, p. 8). And the AHA in the coming weeks is set to release to its members a new guidebook that covers policies for billing, collections and other services for not-for-profit and tax-exempt organizations.
But just what constitutes a community benefit and whether bad debt and federal underpayments should factor into the overall equation have dominated the discussion.
John Colombo, a professor at the University of Illinois College of Law, argued that tax-exempt hospitals should be able to differentiate between the services they provideand to whomand those that for-profit hospitals dont. He took to task not-for-profit hospitals that report routine services such as employee training as a community benefit, saying that to do so is just ridiculous.
One of the problems with the community-benefit test is that the phrase has no inherent content, Colombo said during the roundtable. And as a result, nonprofit hospitals over the years have claimed that virtually everything they do is a community benefit.
Colombo said that a draft report on tax-exempt status released by Grassley earlier this year could stand to be more flexible in determining what services should count. On the other hand, hospitals should not get exemptions based upon generalized claims that they do good things for society. And they should not get exemptions simply by providing the same kinds of services that for-profit hospitals provide.
In data released late last month, the AHA showed that hospitals provided more than
$31 billion in uncompensated care and nearly $30 billion more to cover costs that Medicare and Medicaid did not (Oct. 29, p. 8). In addition, many hospitals support services for the community that they must subsidize, such as mental-health services, geriatrics, chronic disease management, inner-city and rural pri-mary-care clinics and many others, said Nicholas Wolter, CEO of the Billings (Mont.) Clinic and an AHA board member.
Wolter said that his hospital spent nearly $12 million over the past year to treat more than 4,300 patients who could not pay for their care, and an additional $18.6 million related to Medicare and Medicaid shortfalls, and had another $8 million in bad debt. In total, the clinic provided our Montana communities with nearly $57 million in benefitand that counts only activities we can reduce to dollars and cents, he said.
Michael Rodgers, senior vice president of advocacy and public policy at the Catholic Health Association, said the association opposes such legislation because it would lock in a one-size-fits-all definition of community benefit and would interfere with the flexibility and creativity needed by hospital community-benefit programs and would discourage innovative low-cost solutions to community programs.