A new federal study finding wide variation in how not-for-profit hospitals report free care they provide to their communities could set up another showdown next year between reform-minded lawmakers and tax-exempt hospitals.
Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Finance Committee, has announced that he intends to introduce new legislation in January that could force hospitals to follow strict bright line rules for how they measure charity care, bad debt and other forms of community benefits.
Critics say the Iowa senators long-standing efforts to improve not-for-profit transparency could set unreasonably high standards that could hurt communities or even force some hospitals to abandon their not-for-profit status.
Grassleys announcement Oct. 15 of proposed legislation for next year followed the Oct. 14 release of a Government Accountability Office report that said the nations roughly 2,900 not-for-profit, nongovernment hospitals have made it all but impossible to uniformly measure community benefits across the industry. Thats because measurement of activities as community benefit for federal purposes are still largely a matter of individual hospital discretion, the GAO reported.
The American Hospital Association and Catholic Health Association are both opposed to new legislation, urging legislators to wait until the results of the new Schedule H in the Form 990 come in before drawing conclusions or making new rules.
AHA general counsel Melinda Hatton said its clear from Grassleys past proposals why the lawmaker wants to force hospitals into uniform reporting standards: He wants to impose rigid limits and quotas on what hospitals must spend in certain areas, she said. The proposals create quotas and benchmarks that dont allow hospitals to be responsive to their individual communities. And that would be a shame.
A discussion paper presented by Grassleys staff last year proposed not-for-profit hospitals provide benefits equal to at least 5% of revenue to justify their tax exemptions, which total billions of dollars a year across the industry.
Mark Rukavina, executive director of the Access Project, the Boston-based patient-advocacy group, said many not-for-profit hospitals dont seem to live up to expectations of providing charity care to patients in exchange for their significant tax breaks. Even some hospitals whose executives have signed pledges and created policies to provide and advertise charity care have balked when patients or their advocates contact them, he said.
We clearly see hospitals where there doesnt seem to be much coming for their tax exemptions, Rukavina said. Frankly, its not fair to the hospitals that are doing a good job.
Hospital executives said that uniform reporting would not be a problem but having to pay taxes would be. Paul Dell Uomo, chief executive officer of Jupiter (Fla.) Medical Center, said he personally cant fault the senator for wanting hospitals to use firmer standards, but his hospital would have nothing to fear from more transparency.
Officials at the 163-bed hospital are proud of their community benefit work, including expanding services that some for-profit hospitals are turning away from such as obstetrics, emergency room space and diabetes education classes, Dell Uomo said. Financial reports say the hospital contributed $15.6 million in community benefits in fiscal 2007, and generated $181 million in revenue.
We ask the community, and then provide the things they tell us, as much as we can, Dell Uomo said. But Jupiter Medical Center would not be in business in its present state if it had to pay taxes.
The stakes are high for hospitals as to what is included in the definition of community benefit and what isnt. Variations in the activities nonprofit hospitals define as community benefit lead to substantial differences in the amount of community benefits they report, the GAO study says. For example, under the AHAs more-inclusive definition of community benefit, hospitals in Indiana and Texas would both more than double their community benefit totals by including bad debt and Medicare shortfalls. Texas hospitals would only receive credit for 35% of what the AHA considers community benefit under more-restrictive definitions favored by Grassley in past discussions.