Non-profit hospitals face more questions

By STOKELY BAKSH  |  May 27, 2005 at 1:33 PM
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WASHINGTON, May 27 (UPI) -- Non-profit hospitals in the United States, which have spent the past year battling lawsuits alleging they failed to provide the charity healthcare required under their tax-exempt status, this week came under scruitny by House and Senate leaders who also demanded they explain their business practices.

A day after Senate Finance Committee Chairman Charles Grassley, R-Iowa, asked for an investigation of the financial practices of 10 of the largest U.S. non-profit hospitals, House Ways and Means Chairman Rep. Bill Thomas, R-Calif., Thursday said.....( XXXXXX We need a direct quote here from Thomas)

Add in a graf here about the Finance letter -- what does it ask, etc.

Non-profit hospitals around the country have had some success fighting lawsuits filed by a group of law firms led by Mississippi lawyer Richard Scruggs that allege they did not live up to their tax-exempt responsibilities. That has not, however, brought closure on the issue.

"It's increasingly difficult to differentiate for-profit from non-profit healthcare providers," Commissioner of Internal Revenue Mark W. Everson testified before Ways and Means.

During the hearing the IRS received some blame from lawmakers for changing its interpretation in its initial 1956 ruling on charitable tax exemption. (OK WHAT CHANGED?)

Stan Jenkins, chairman of the Champaign County Illinois Board of Review, said more federal oversight is needed for non-profit organizations that receive charitable tax exemption because county officials are intimidated by hospital politics or ill-equipped to adequately deal with such issues. (DIRECT QUOTE???) AND THEN A TRANSITION LINE TO THE PROVENA STUFF....

In 2001, Provena Covenant and Carle Foundation hospitals in Champaign County were stripped of their charitable tax-exempt status by the state Department of Revenue, Jenkins said. A county investigation found Provena Covenant operated non-profit and for-profit sectors under its umbrella. Provena Hospitals and Senior Services transferred $159.7 million to the parent corporation, Provena Health and Provena Health transferred $23.1 million to a for-profit Provena Ventures. Meanwhile, Carle Foundation was found to had over-charged patients and sued patients over medical debt, Jenkins said.

"A hospital has every legal right to pursue collections through the court system like any other business," Jenkins testified. "But they can't have it both ways. They can't act like any other business yet expect to enjoy tax-exempt status unlike any other business, especially if they hold themselves out to be charitable organizations under either federal or state law."

He suggested federal legislation should require hospitals to set up adequate debt repayment programs and -- set up reviews of the proliferation of for-profit businesses affiliated with non-profits. (WHAT DOES THIS LAST PART MEAN?)

Professor John Colombo, of the University of Illinois's College of Law in Urbana-Champaign, said, "Hospitals have enjoyed exemption from the federal income tax virtually since the beginning of the income tax system."

YOU NEED TO BE MORE CLEAR -- IS THIS FEDERAL OR STATE LAW -- AND MORE SPECIFIC ABOUT PROVISIONS OF CHARITY CARE -- Current law uses the Community Benefit Standard, which requires non-profit healthcare organizations be governed by members of the community rather than financially interested individuals. It provides for full-time emergency room to all patients, regardless of their ability to pay and requires excess funds be applied to the expansion and replacement of facilities and equipment, as well as training and research.

"(There) is a lack of accountability for legal exemptions," Colombo said.

In Texas, lawmakers adopting specific charity care standards in the 1993 Nonprofit Hospital Community Benefits Law, which requires non-profit hospitals to provide community benefits equal to 5 percent of net patient revenue, of which 4 percent must be the cost of charity care and unreimbursed cost of government-sponsored health careprograms while providing services in relation to the community's needs.

John T. Thomas, senior vice president of Baylor Health Care System in Texas said Baylor conducts formal community needs assessments and non-profit hospitals submit annual reports detailing amount of charity care and community benefits provided.

Baylor files three separate reports for its two major facilities, Baylor University Medical Center and Our Children's House at Baylor, which satisfy the law requirements because of their heavy Medicaid patient load. A third report is a consolidated assessment of its network of non-profit hospitals. Thomas said Baylor Health Care System's total community benefit was $240 million in 2004.

Thomas testified, "Texas charity care law is a fair, objective standard for determining if a hospital is meeting its mission as a nonprofit organization."

A recent survey conducted by the PricewaterhouseCoopers' Health Research Institute, however, showed hospitals providing far more free care than the $25 billion they report annually. The study found the rising number of uninsured Americans are forcing hospitals to absorb higher levels of charity care and bad debt.

They found that it was difficult to report on the value of charity care because of inconsistencies as well as claimed that attacks were made on hospitals aggressively collecting money without consideration for discounts and various charges given to the uninsured.

TRY CALLING AND GETTING A QUOTE -- "The details about how charity care is accounted for are more important today than ever before because charity care affects healthcare resources, bed spaces and physician time, and the cost is reallocated to other patients," Reatha Clark, a partner in the PricewaterhouseCoopers Healthcare Industry Group, said in a statement. "It is foolish to think that hospitals can continue to bear the costs of the growing uninsured population. Ultimately, the question is: Whose responsibility is care for the poor and uninsured?"

Still, for other non-profit and faith-based organizations, a review of the IRS rulings is necessary so that tax-exemptions are going to the right places, especially at a time when healthcare systems are competing for subsidies.

"Many non-profits have a weak structure," said Sister Carol Keehan, chairperson of the Board of Trustees of the Catholic Health Association of the United States. "We need to strengthen it, rather than tossing the non-profit structure out."

CHA, a faith-based organization that provides community health services, began the "Social Accountability Budget" and "The Community Benefit Inventor for Social Accountability" to plan, monitor, report and evaluate the community benefits activities in which the organization participates. The CHA hopes such standards could help non-profit hospitals better serve their communities.

-- Try to add in an additional comment or two from the lawmakers on where they want to take all this -- that would be a good wrap up.

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