Hospitals Not Returning Tax Benefits, Report Says; Industry Leader Defends Offerings

Gongwer News Service - June 16, 2005

Gongwer News Service

Ohio’s community nonprofit hospitals benefited from tax breaks of about $900 million in 2003, but provided charity care valued at far less than that amount, according to a new report presented to a panel of legislators on Thursday.

The study, produced by District 1199 of the Service Employees International Union, questioned whether hospitals continue to deserve the special tax status given that their charity care levels are relatively low. It said hospitals saved $898 million in taxes while offering $219 million in charity care.

A leader in the hospital industry said, however, that the charity care figures in the report don’t include all the benefits that hospitals provide to Ohioans.

Separately, Minnesota’s solicitor general advised the “fact-finding” panel convened by Rep. Barbara Sykes (D-Akron) of that state’s successes in getting hospitals to offer “reasonable” debt collection plans and cut the cost of medical services provided to the uninsured.

The hearing, which Ms. Sykes said was not designed as a forum against hospitals, later featured a heated exchange between the chair and John Callender of the Ohio Hospital Association.

Scott Courtney, executive vice president of the SEIU, told the panel that Ohio’s nonprofit hospital charity care levels equal 1.4% of total expenditures. Further, he expressed concern about the apparent growth of lawsuits he said hospitals are filing to collect debts.

Mr. Courtney also raised concerns about what he said are hospitals’ tactics to discourage union organization while employees are on the clock. “Hospitals aren’t used to being challenged,” he said.

“In my opinion, what we’re looking at today is an industry that’s run amok,” he said. “The charitable hospitals of the past, which were dedicated to caring for the poor, have been replaced by giant corporations that wield great power in the marketplace. Instead of living up to their charitable purpose, it appears that they are simply taking advantage of a tax loophole that they do not deserve.”

Mr. Callender said hospitals provide hundreds of millions of dollars in charity care, noting that it “amazes” him that hospitals are credited only for cases when they don’t bill patients.
He said federal law requires hospitals to bill patients for services and noted that state law requires hospitals to provide notice twice that uninsured patients may qualify for benefits through the Hospital Care Assurance Program. If patients qualify for the program, he said, hospitals write off the cost of that care.

Zach Schiller of Policy Matters Ohio told the panel about his group’s report detailing the impact that the tax-exempt status of two major northeast Ohio health systems have on Cuyahoga County revenues. He said exemptions for University Hospitals and the Cleveland Clinic cost the county about $34 million per year, or about $17.5 million a year, when factoring in likely tax rate reductions had the hospitals challenged valuations over the years.

Minnesota Solicitor General Lori Swanson said the attorney general’s office, which regulates nonprofit and charitable organizations, has established agreements cutting charges and addressing debt collection methods with about 75% of the state’s hospitals. Testifying via videoconference, she said the office engaged lawmakers on imposing related requirements,
but said hospitals voluntarily agreed to the terms.

She said the signing of the agreements followed the office’s completion of compliance reviews of some of the state’s largest health systems. Those reviews, she said, found lavish spending on executive compensation and exotic travel and recreation.

Mr. Callender said Ohio’s hospitals are willing to discuss such agreements, but noted that policies on charitable care need to be tailored to meet regional economic conditions. He further noted that hospitals are willing to establish payment programs with patients if they seek such arrangements. “This going to collection and everything else is when we hear nothing” from patients, he said.

Rep. Dan Stewart (D-Columbus) questioned whether hospitals, characterized as just being able to survive financially, were really turning significant profits. Mr. Callender noted that profits are relatively small given the size and worth of the systems. “Guess what,” he said. “Every penny that they make is plowed back” to system investments.

He further pointed challenged portions of the SEIU report that indicate hospitals are engaged in separate businesses – something he said is allowed by law. “This is an indictment with no crime,” he said. “It should be encouraged and not condemned.

As Mr. Callender concluded his responses to questions, Ms. Sykes, acting as chair, offered the following statement: “I am appalled by your attitude,” she said. “I see disgust in your face. I hear no empathy in your voice. I am embarrassed that you are here representing the Ohio Hospital Association. I have no questions.”

Mr. Callender’s response: “I apologize if I offended the chair.”

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