Study: Hospitals will be Hampered by Legislation Asking Non-Profits for Tax-Exempt Accountability

ASSEMBLY | HEALTH CARE | A state legislative audit two years ago found non-profit hospitals receiving lucrative tax-exemptions lack accounting for the amount of charity care they provide. Last year, East Bay Assemblymembers Bob Wieckowski and Rob Bonta authored a bill based on the audit’s recommendations. Wieckowski pulled the bill last May.

However, a study released Thursday by the California Hospital Association, authored by former South Bay Rep. Tom Campbell, says any future legislation would make it increasingly difficult for providers to offer care to the poor and uninsured. It may also inadvertently affect the success of Covered California, the state’s version of the Affordable Care Act, it says.

“The sponsors of such public policy base their recommendations on the assumption that non-profit hospitals do not provide sufficient public benefit to justify their non-taxed status,” said the report issued in conjunction with the Berkeley Research Group.

Despite AB 975 not being currently debated in the State Legislature, Wieckowski defended the bill in a statement Thursday. “These important medical facilities receive millions of dollars in favorable tax treatment by Californians and in return are expected to provide lower-income residents in their communities free or reduced-cost medical care,” said Wieckowski.

“However, as reports have repeatedly noted, there is no statutory standard or methodology to calculate the level of charity care currently provided and each hospital organization calculates their levels differently. Audits have also found that some non-profit hospitals do not submit their community benefit plans as required.”

In many ways the debate whether non-profit health care providers offer enough charity care to the communities they reside, at least, commensurate with the tax breaks they receive began, in San Leandro. The threat of examining the non-profit status of large non-profits like Sutter Health, was used by local officials, in part, as a negotiating tactic to end a nearly five-year saga to keep San Leandro Hospital from closure.

An audit requested by State Sen. Ellen Corbett and Alameda County Supervisor Wilma Chan found no mechanism for the state to calculate whether taxpayers were getting much in return for tax-exemptions given to non-profit hospitals. “We saw that each hospital had its own method to calculate its costs to provide health care services for which it did not receive compensation (costs of uncompensated care),” said the report, released in August 2012. “Indeed, no statutory standard or methodology for calculating these amounts exists.”

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