Filed under: — tkm January 29, 2008 @ 14:0 pm

Nonprofit Hospitals under scrutiny

Ohio Takes New Look at Nonprofit Hospitals
January 23, 2008Ohio’s Attorney General, Marc Dann, is beginning an investigation into whether the state’s 174 nonprofit hospitals can justify their tax-exempt status, reports The Columbus Dispatch. While a previous effort failed due to criticism from hospital leaders and other nonprofit organizations, Mr. Dann believes that a more collaborative approach this time will help assure his success.

“Anytime you start to hold people accountable who have not had that for decades, if not centuries, people are going to start to be nervous,” Mr. Dann said. He took the first steps toward working with relevant nonprofit groups last week by discussing his ideas with the board of the Ohio Hospital Association, which represents the nonprofit hospitals.

A hospital-association spokeswoman, Tiffany Himmelreich, said that the group would “work hard with the attorney general’s staff to explain what community benefits the hospitals provide” but noted that the Internal Revenue Service was undertaking a similar effort to require more detailed financial accounting beginning in 2009. Ms. Himmelreich said the association hopes Mr. Dann’s efforts won’t duplicate the IRS’s work.

Among Mr. Dann’s goals are to investigate how much nonprofit hospitals pay their executives, how they collect unpaid medical bills, how much charity care they provide, and how much financial information they disclose to the public.

PERSPECTIVE: Governments see dollar signs in nonprofit hospitals
1-23-08COLUMBUS, Ohio — At first glance, two big news items of last week _ a projected state budget deficit of up to $1.9 billion, and Attorney General Marc Dann’s probe into the finances of Ohio’s nonprofit hospitals _ may seem only distantly related.But look again.There’s a reason Dann, fellow state attorneys general, congressional Republicans and the Internal Revenue Service are all pushing nonprofit hospitals for more thorough financial reporting: Hospitals represent the largest piece of a nonprofit sector that has been succeeding as other, taxpaying industries fail.

According to the National Council of Nonprofit Associations, the number of charitable nonprofits filing with the IRS jumped 68 percent between 1993 and 2003, to 837,027. Such businesses are not required to pay the taxes other businesses pay because they are deemed to provide charitable benefit to their communities.

Dann wants Ohio’s 174 nonprofit hospitals, including the world-renowned Cleveland Clinic, to come forth with evidence that they are worthy of their charitable status. In theory at least, failure on the hospitals’ part to make a convincing case could mean an influx of new tax revenue for Ohio’s dwindling reserves without the whisper of a statewide tax increase.

In Montana, a study commissioned by Attorney General Mike McGrath determined that 11 major, nonprofit hospitals were doing a less than stellar job of identifying patients worthy of charity care before sending their bills to debt collectors, a key component of their mission from the state’s point of view.

The hospitals are confident, however, that they are meeting their charitable goals.

Watching as the issue spread from Washington into the states, the Ohio Hospital Association prepared and released its first-ever Community Benefit Report this summer, detailing the ways its member hospitals serve their communities.

“It’s completely understandable why there is this appetite for more information, why there is this thought that might be entertained out there, ‘If we could only collect taxes from some of these organizations that aren’t paying…,'” said Mary Yost, a spokeswoman for the hospitals. “But from our perspective it’s shortsighted. They are not looking at the big picture of ‘What are hospitals able to do with their resources that benefits the community, that they might not be able to do if they paid taxes?'”

The hospital association’s report estimated that Ohio’s $58.8 billion nonprofit hospital industry provided $1.5 billion in net community benefit in 2007 alone, including the Medicaid losses they absorbed that would otherwise have fallen to government, the charity care they provided, and the $887 million they invested in additional programs of civic benefit, such as disaster preparedness efforts and medical research.

There is no denying, however, that the nonprofit sector _ both at the state and national levels _ has grown as other sectors have faltered.

A 2006 study by the Johns Hopkins Nonprofit Employment Data Project ranked Ohio’s nonprofit sector as the second-fastest growing, after Nevada’s. It had a 14.7 percent gain in jobs from 2002 to 2004 compared to an overall loss of jobs of about 1 percent. Nonprofit workers made up 10.6 percent of the state’s overall work force, the study found _ slightly higher than the national average.

Among charitable entities, hospitals are king _ employing a third of all nonprofit workers in the country and at the highest salaries, the study found. The sector’s employment is followed consecutively by nursing and residential care facilities, educational institutions, and social assistance organizations.

Its largesse has simultaneously made the hospital industry a political powerhouse, which helps explain why an earlier effort to improve financial reporting by hospitals _ launched in 2006 by Dann’s predecessor, Republican Jim Petro _ was ultimately unsuccessful.

According to data compiled by the nonpartisan Center for Responsive Politics, the American Medical Association and the American Hospital Association have spent more on lobbying since 1998 than all but two other entities in the country. So far this year, hospitals and nursing homes have made nearly $6.4 million in political contributions to federal candidates, the center found.

Petro proposed requiring nonprofit hospitals to file annual financial reports to the state, as most other charitable organizations do. The proposal failed.

Yost said hospitals already file forms with the federal government that any member of the public can see, and that filing additional state paperwork would increase costs. She said reporting changes coming from the IRS will require them to provide even more information.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Ohio’s top lawyer asks nonprofit hospitals to justify tax breaks
By Associated Press
POSTED: 04:44 p.m. EST, Jan 22, 2008

COLUMBUS: For the second time since 2006, Ohio’s top law enforcer is seeking information on 174 Ohio hospitals that get tax breaks linked to their status as nonprofit, charitable organizations.

Attorney General Marc Dann, a Democrat elected in January, wants the institutions to justify their tax-exempt status and has launched an effort to collect detailed data on their operations, including how much they pay their executives, how they collect unpaid medical bills, how much charity care they provide, and what financial information they share with the public.

A similar effort by Dann’s predecessor, Republican Jim Petro, was largely abandoned in 2006 amid criticism from leaders of hospitals and other nonprofit groups. The attorney general’s office enforces laws governing nonprofit organizations.

Petro’s initiative sought to have nonprofit hospitals register with the state, outline measures to prevent fraud, file mission statements, outline policies for collecting unpaid bills and prove they were charging indigent patients fair rates.

Dann discussed his ideas last week with the Ohio Hospital Association, which represents the nonprofit hospitals as well as six for-profit medical centers. He acknowledged the latest probe could stir controversy.

”Anytime you start to hold people accountable who have not had that for decades, if not centuries, people are going to start to be nervous,” Dann said in an interview with The Columbus Dispatch published Monday. ”I think you get more bees with honey than with vinegar. I think we’re going to be as collaborative as we can.”

Tiffany Himmelrich, a spokeswoman for the Hospital Association, said the hospitals provide many community benefits beyond treating patients who are unable to pay.

”The hospital association is really going to work hard with the attorney general’s staff to explain what community benefits the hospitals provide,” she said. ”It’s not just charity care.”

Charity care accounted for $816 million of the $2.2 billion that nonprofit hospitals provided in unreimbursed services in 2005, according to the association’s 2007 annual report. The rest went to losses on Medicaid and Medicare patients and debts the hospitals wrote off.

The Internal Revenue Service will require more detailed financial accounting from nonprofit hospitals beginning with the 2009 tax year, which may address some of the same questions Dann is asking.

Cathy Levine, executive director of Universal Health Care Action Network of Ohio, a patient-advocacy group, said involving the hospitals at the outset may help Dann succeed where Petro failed.

She suggested Dann scrutinize hospital billing practices to ensure that uninsured and underinsured patients aren’t driven to financial ruin by medical bills.

Hospitals’ charity care draws scrutiny
Sunday, December 09, 2007
Plain Dealer Reporter Sarah Jane Tribble

While this may be a season of giving, a host of critics are demanding that nonprofit hospitals like the Cleveland Clinic and University Hospitals do more to prove that they’re giving enough.

At the federal and state level, lawmakers have called for hospitals to detail their acts toward public good, such as amounts of charity care. And the IRS also is targeting them for more information and reporting.

Locally, the skeptics view them as “freeloaders” taking advantage of a system that gives them taxexempt status for undefined community benefits.

For the hospitals, the stakes are high. That tax-exempt status is worth millions every year. “It’s pretty clear to us that it’s an issue that needs some resolution, needs some finality from a whole bunch of directions,” said Bill Ryan, president and chief executive officer of the Center for Health Affairs, a coalition of Northeast Ohio hospitals.

The hospitals say they provide millions in community benefits through free care, education, research, jobs and outreach programs. The Cleveland Clinic recently announced that it provided about $390.7 million last year to benefit the region’s residents.

University Hospitals reported in public financial statements that it provided more than $181 million to “its local communities and the human race as a whole.” Yet their critics aren’t satisfied. They are demanding a minimum standard of giving and question exactly how much the hospitals do.

“Those people need to pay some taxes. They are freeloading,” Maple Heights resident Ahmad Wasim said last week. “It’s not fair at all.” At a U.S. Senate hearing in October, testimony by Cleveland’s Dr. Ashwini Sehgal made Greater Cleveland’s health system ground zero for the national struggle between health-care profits and charity.

“Frankly, my impression in Cleveland is that the hospitals are focused on two lines. They’re focused on the bottom line — in other words what’s their revenues compared to expenses — and they’re focused on the skyline — in other words how many new buildings can they build as part of their medical complexes,” said Sehgal. He is a comedical director for the Cleveland Public Health Department but was not speaking for the agency when he testified.

The doctor, who also sees patients at the region’s countyowned hospital, urged legislation to require nonprofit hospitals to provide a certain level of free care.

“We need to get them to pay more attention to another line, which is the line with all the uninsured people in Cleveland who can’t afford health care,” he said.

Demands escalate for giving standards For more than a decade, lawmakers have questioned why the federal government does not have a standard to measure exactly how the hospitals provide benefits for their communities — and the interest has only intensified.

Republican Sen. Chuck Grassley of Iowa two years ago asked the Cleveland Clinic and nine other hospitals to justify the tax breaks they received. Grassley wants a national standard and has proposed that nonprofit hospitals spend at least 5 percent of annual patient operating expenses or revenues, whichever is greater, on charity care.

“Unfortunately, the answer all too often is that nonprofit hospitals often do little to help low-income individuals, charge top rates to the uninsured, and provide little charity care,” Grassley said in a statement for The Plain Dealer.

If Grassley’s proposal were law, the Cleveland Clinic would have needed to spend $214.3 million in charity care in 2006 because it reported $4.3 billion on program services, which are considered net patient revenue, to qualify for tax exemption. It spent $110.4 million, according to the system’s community benefit report.

University Hospitals would have had to spend $59.6 million in charity care because it reported $1.2 billion in net patient revenue to qualify. It spent $80.5 million in charity care and uncompensated care, according to its annual tax filing.

Grassley’s efforts dovetail with those of the Internal Revenue Service to require more specific reporting for the nonprofit sector. The IRS is revising its form for the first time in decades after a wide-ranging investigation of nonprofits. A sample of the new form, which will demand more details about how the hospitals spend money, will be released soon. The form could be in use as early as 2009 for the 2008 tax year and is viewed by some as a step toward setting national requirements.

The American Hospital Association and Cleveland’s big nonprofits asked that the form be delayed until 2010. And last month, U.S. Rep. Stephanie Tubbs Jones penned a letter with the support of the hospital association asking the IRS to delay the report.

The Democrat, whose district includes Cleveland’s East Side and some suburbs, also asked that the final form allow various ways for the hospitals to define how they provide.

“Truly, one standard would be the easiest way for someone to review the work that they do,” Tubbs Jones said in an interview. “However the type of work hospitals do may not be as easily shown in one way. I’m not stuck on one standard. I want the hospitals to show, and the IRS to fairly judge what they do.” When approved, the new form will have far-reaching impact in Ohio: 80 percent of the state’s 171 hospitals are nonprofit, according to the American Hospital Association.

“It’s frankly puzzling to us that the hospitals doing more charity care aren’t crying out for these standards,” said Mark Rukavina, director of the Access Project, a health-resources and consumer-advocacy group based in Boston.

Each of us have different missions’ But Ohio Attorney General Marc Dann would like a standard. “The more that it happens collaboratively and voluntarily, the better,” Dann said. He intends to push the issue in 2008. “But I am not afraid to step in and use our enforcement powers or our rule-making authority.”

“While Ohio has not clearly defined charity care, several other states, including Texas, have passed laws to set standards. The topic is particularly sensitive for Greater Cleveland, where MetroHealth Medical Center, the county-owned hospital, reported $8.9 million in losses for the first nine months of this year in part because of uncompensated care. Dann said he has met with both the large nonprofits in Cleveland and is “concerned about the looming deficits at MetroHealth.”

MetroHealth Chief Executive John Sideras said he hopes for a collaborative effort among the hospitals that will address the rising numbers of nonpaying patients coming through Metro- Health’s emergency room doors for basic care, like prescription drugs or follow-up appointments.

Their strategies have taken them in a direction that is not on point with where the community is at this point,” he said. “And this community needs a major installment of primary care for the uninsured.” Matt Carroll, director of Cleveland’s department of public health, said one of the biggest challenges for the community is how charity care — or the free care hospitals are expected to provide — is reported. Metro- Health, University Hospitals and the Clinic all use different calculations and standards, making it difficult to compare their services.

The Clinic favors transparency, said spokeswoman Eileen Sheil, and broad community benefit-reporting standards supported by the Catholic Health Association, which includes providing information on community outreach, research, education and community building.

University Hospitals’ Heidi Gartland, vice president of government relations, said the system is carefully watching the discussion and is in favor of standard reporting that allows each hospital system to emphasize the benefits it individually provides to the community.

“Each of us have different missions,” Gartland said. “I think that makes us all unique that we serve our communities in the way that we think [best] from knowing our communities.” Health Affairs’ Ryan has said his board members — whose largest institutions are the Clinic and University Hospitals — have agreed to explore the possibility of setting guidelines among the regional hospitals and have tentatively talked about presenting a state law that would require that minimum standards be met.

The discussions are still in development, but Ryan, who sees his job as “looking over the horizon and offering advice to members,” said he thinks it is best for the hospitals to meet a common standard.

“What looks like charity in one institution doesn’t necessarily look like charity to another,” he said. “We’ve been trying to convince folks that there is no real benefit to doing it differently.”

posted by tkm 1-29-08

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