California may revoke tax exemptions for profitable hospitals

Hospitals oppose the proposed legislation

Topics: Finance, Health Policy, Market Trends, Strategy, Uncompensated Care, Revenue Cycle

April 1, 2013

Hospitals are rallying to defeat proposed legislation that could eliminate tax exemptions for profitable not-for-profit facilities in California.

Details of the proposed law

Current California law requires not-for-profit hospitals to submit community needs assessments every three years to prove that the public is benefiting from the hospitals' tax-exempt status.

The bill—by Assembly members Rob Bonta (D) and Bob Wiecowski (D)—would increase the level of charity care that not-for-profit acute care facilities must provide and tighten hospital reporting requirements.

As of late Friday, the exact language of the bill's requirements still was in flux, Modern Healthcare reports. The Assembly Health Committee is scheduled to hold its first hearing on the bill on Tuesday.

Labor groups support the bill

Charles Idelson—a spokesperson for the California Nurses Association—said that over the past few years, many profitable tax-exempt hospitals have lost the public's trust by prioritizing profits and paying high executive salaries even as the hospitals are "chipping away" at less-profitable services for low-income patients.

He said the bill "is an effort to increase transparency and make hospitals more accountable to the communities that they purport to serve," adding, "Hospitals that are meeting their charity care obligation should welcome this process and understand that it is an opportunity to rebuild some of the public trust that they have lost through their other policies and practices."

Hospitals oppose the bill

However, hospital officials said that the proposal would impose a misguided "one-size-fits-all" approach that would hurt hospitals and hinder programs for low-income residents. They also argued that the bill's requirements could force some facilities to close.

Jan Emerson-Shea—a spokesperson for the California Hospital Association—said that labor union supporters of the bill were hiding their real agenda to harm the "reputations of the hospitals through corporate campaign tactics."

Michael Hunn—CEO for Southern California hospitals at Providence Health & Services—said the bill is "less about good public policy than it is about politics." He added, "No matter what the legislative and political process is, we need to keep in mind the human beings that it is our responsibility to care for" (Carlson, Modern Healthcare, 3/30 [subscription required).

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