Non-profit Hospital Responses to Finance Committee

Non-profit Hospital Responses to Finance Committee

In May 2005, Sen. Chuck Grassley, chairman of the Committee on Finance, wrote to 10
major non-profit hospitals, asking a series of questions about their care to the poor and service to the
community. Grassley is convening a committee hearing tomorrow, Wednesday, Sept. 13, at 10 a.m.,
in 215 Dirksen Senate Office Building, to hear testimony on "Taking the Pulse of Charitable Care
and Community Benefits at Nonprofit Hospitals." He is releasing a summary of the hospitals'
responses today and made the following comment on them.

"Today the Finance Committee is releasing the answers it received to its questions to 10
major non-profit hospitals. As the committee holds a hearing tomorrow on non-profit hospitals, I
want my colleagues and the public to benefit from seeing the answers provided. Based on my review
of these responses, and correspondence with for-profit and non-profit hospital organizations, I've
reached preliminary conclusions.

"Non-profit doesn't necessarily mean pro-poor patient. Non-profit hospitals may provide less
care to the poor than their for-profit counterparts. They may charge poor, uninsured patients more
for the same services than they charge insured patients. They sometimes give their executives goldplated
compensation packages and generous perks such as country club memberships. All of this
calls into question whether non-profit hospitals deserve the billions of dollars in tax breaks they
receive from federal, state, and local governments.

"Unfortunately, it's almost impossible to get an exact measurement of how much charity care
and community benefit, such as vaccination clinics or cancer screenings, that non-profit hospitals
offer to earn their special tax status. That's because non-profit hospitals don't have to report any kind
of information about those activities to the IRS. And there are no uniform standards or definitions
for charity care and community benefit. The IRS, and Congress, have allowed non-profit hospitals
to use their own definitions.

"In the responses from the 10 non-profit hospitals, it was surprising to get such enormous
differences in answers to the same questions. It was rare to get the same answer from even two
hospitals. These differences in responses were at the core of many questions, including: how charity
care is determined and valued, who is eligible for charity care, and what constitutes community
benefit and how that's measured.

"The different yardsticks used makes weighing and considering the charity care and
community benefit of different non-profit hospitals less like comparing apples to oranges as
comparing apples to farm tractors. The Catholic Health Association (CHA) recently established
common rules and guidance for reporting and measuring key parts of community benefit for its
member hospitals. I appreciate this effort and am pleased that hundreds of hospitals already have
agreed to comply with CHA guidelines. I'm sure many non-profit hospitals are well-intended and
do outstanding work on behalf of their communities and the poor. But I'm concerned that the best
practices of non-profit hospitals are not common practices for all.

"The IRS is creating a supplemental report to the Form 990 to include additional information
from non-profit hospitals and their charity care and community benefit. I hope the IRS will give
strong consideration to having that new information requirement conform with CHA guidelines. IRS
Commissioner Mark Everson committed last year in hearings before the House Ways and Means
Committee to having this new information reporting for hospitals in place. We need to see IRS
action on this front. We also need to see all non-profit hospitals agree to common reporting. I'll
listen closely at tomorrow's hearing to see to what extent congressional action may be necessary, and
to what extent the IRS and the non-profit hospitals can achieve much more meaningful, uniform
disclosure about hospital activities without additional legislation.

"The committee also is releasing today two letters from the Federation of American Hospitals
(FAH), which represents investor-owned hospitals. The FAH information is very eye-opening. It
highlights several for-profit hospitals that are providing as much if not more charity care than some
non-profit hospitals. The Government Accountability Office (GAO) and the Commissioner Everson
have both commented that there is often little to no difference between for-profit hospitals and nonprofit
hospitals when it comes to charity care and community benefits provided. Non-profit hospitals
receive billions in tax breaks at the federal, state and local level. The public has a right to expect
significant, measurable benefits in return. I hope the hearing will help the Finance Committee decide
how we can best ensure that non-profit hospitals provide appropriate levels of benefit to the
communities they serve.

"Not only is there often very little difference between for-profit and non-profit hospitals when
it comes to serving the community, but also the release of the answers today shows that there appears
to be very little difference on executive compensation. Some non-profit hospital executives enjoy
the best hotels and great meals, all subsidized by the taxpayer. I find it especially troubling that
executive after executive is having country club dues paid for by non-profit hospitals. While one
hospital ended this policy after I inquired, far too many non-profit hospitals still think paying for
country clubs should be business as usual. I'm afraid that if non-profit hospital boards are focusing
so little attention on what they're paying executives, they're giving even less attention to how the
hospitals are helping the community and the poor. I intend to look at legislative reforms that will
make sure the boards are more focused on ensuring fair, just executive compensation at all nonprofits,
including hospitals."

http://finance.senate.gov/press/Gpress/2005/prg091206.pdf