Nonprofit hospitals scrutinized
Congress wants to make sure facilities live up to expectations
Joe Goldeen
Record Staff Writer
Published Saturday, Sep 16, 2006
STOCKTON -
In 2005, San Joaquin County's
five nonprofit hospitals gave
$78 million back to the
community in the form of charity
care and other benefits.
But is that enough?
Congress wants to know, and in
the past week, the Senate
Finance Committee held a hearing
to determine if nonprofit
hospitals are living up to their
obligations to maintain their
tax-exempt status.
Committee Chairman Sen. Chuck
Grassley, R-Iowa, is leading the
charge. He said the Internal
Revenue Service and Congress
have done little to ensure
uniform measurements and
reporting by nonprofit hospitals
of their community benefits,
discounted charges or free care
to the poor and uninsured.
"Federal, state and local
governments give nonprofit
hospitals tens of billions of
dollars each year in tax breaks.
It's our responsibility as the
Senate committee in charge of
taxes to understand what
benefits these hospitals provide
to the public in exchange for
this special tax treatment,"
Grassley said.
"Right on," Lodi Memorial
Hospital spokeswoman Carol
Farron said. "We welcome the
opportunity to talk about the
community benefits we provide."
Throughout San Joaquin County,
tens of thousands of residents
can claim their lives were made
better because of a free or
reduced-cost service they
received from St. Joseph's
Medical Center or Dameron
Hospital in Stockton; Lodi
Memorial Hospital; Sutter Tracy
Community Hospital; or Kaiser
Permanente Foundation
Hospital-Manteca.
Some of the best-known examples
of these community benefits
include St. Joseph's Nurse Call
Center and its CareVan, bringing
a doctor to one of Stockton's
poorest neighborhoods daily;
Lodi Memorial's free
primary-care clinic for the
uninsured in cooperation with
the Salvation Army; Kaiser's
annual Neighbors in Health
fairs, attracting thousands of
people who normally would never
see a doctor; Healthy
Connections, Sutter Tracy's new
community health resource center
for south county residents; and
Dameron's free immunizations for
children.
To put in perspective the
hospitals' combined $78 million
contribution - as reported by
the hospitals to California's
Office of Statewide Health
Planning & Development -
consider that the latest
year-round effort of United Way
of San Joaquin County will
provide about $4 million to area
charities.
"It's absolutely invaluable what
the hospitals contribute to
improve lives in the county,"
United Way President and CEO
Andy Prokop said.
As vital to the health of the
community as these programs are,
Grassley has said in some cases
he can't tell the difference
these days between a for-profit
and a nonprofit hospital.
Doctors Hospital of Manteca, the
county's lone for-profit
hospital operated by Tenet
Healthcare Corp., in addition to
providing uncompensated care for
some patients, provided more
than 1,000 free vaccinations
last year, offered free
health-education classes and
regularly opens up its meeting
rooms to support groups and
other organizations.
Alvin Brown, 73, a tax attorney
and founder of IRS Forum in
Fairfax, Va., spent 27 years
working in the office of the IRS
chief counsel. He has studied
the issues hospitals face in
meeting the terms of their
501(c)(3) status, the federal
tax code that covers nonprofit
status.
Because of Grassley's efforts,
Brown said the government is
beginning to increase its
efforts to examine nonprofit
hospitals, noting that in the
previous 10 years the IRS has
only audited 350 health-care
organizations out of 7,000
nationwide.
"They are looking at the whole
industry. This is really a
call-to-arms against the
hospital industry," Brown said.
"All of this effort by Grassley
and the IRS is very, very
unusual to see an entire
industry examined."
National standards, such as the
new guidelines established by
the Catholic Health Association
this summer, would go a long way
toward easing concerns over
reporting, many people say.
Bruce McPherson, a national
advocate for nonprofit
health-care organizations based
in Washington, D.C., is one of
them.
"We strongly believe there does
have to be uniform reporting on
community benefits. If you
really are going to get uniform
reporting, you have to mandate
it," said McPherson, executive
director of the Alliance for
Advancing Nonprofit Health Care.
In addition to operating clinics
and providing health education
opportunities, a tremendous
amount of the charitable funds
nonprofit hospitals expend goes
toward uncompensated costs of
Medicare and Medi-Cal, nonbilled
services and traditional charity
for the poor and uninsured.
In many cases, and it's
especially true in San Joaquin
County, the hospitals are among
the major employers in their
cities, pumping large payrolls
and purchases back into the
community.
"Economically, we are one of the
driving engines in our
community," Lodi Memorial's
Farron said.
"What we provide in community
benefits is killing us. We have
a moral and ethical
responsibility to treat patients
who show up on our doors, but we
lose millions of dollars every
year that we don't get
compensated for," she said.
In 1994, the California
Legislature passed SB697, The
Hospital Community Benefit
Program. It states that private,
nonprofit hospitals "assume a
social obligation to provide
community benefits in the public
interest" in exchange for their
tax-exempt status. It requires
hospitals to file annual reports
with the Office of Statewide
Health Planning & Development
describing their efforts, but
there is no standardization in
how they compile their reports.
