Del Norte County’s representative in the state assembly introduced a bill Monday that would change how nonprofit hospitals report the value of community benefits.
Community benefits include services a nonprofit hospital provides to vulnerable populations, charity care, its support of public health programs and donations of funds or resources that contribute to a community priority, according to a press release from Assemblyman Jim Wood’s office.
If approved, Assembly Bill 204 would establish a uniform set of standards for how nonprofit hospitals calculate and report the value of community benefits, according to the press release. This includes requiring systems with more than one hospital to report the information separately for each of its facilities, according to the release.
The bill would also prohibit a hospital from including certain costs such as fundraising and compliance expenses in the calculation of its community benefits costs. And it would grant regulators the ability to assess fines against hospitals failing to provide community benefit plans and reports, according to the press release.
Nonprofit hospitals have been required to develop community benefit plans since 1996, describing how they meet the needs of its community through the provision of community benefits, which gives a hospital certain tax advantages.
“Unfortunately, there is no standard method for calculating the actual value of community benefits or how hospitals report them to the state,” Wood said in a written statement. “And because there is no standard, it makes it difficult for communities to assess an accurate value of the community benefits provided in exchange for a nonprofit hospital’s tax-exempt status, and that’s a problem.”
If approved, AB 204 would require individual hospitals and hospitals within a larger system to provide information on what it’s doing to benefit the community it serves “using consistent and uniform measures to determine the value of those services.”
Dr. Greg Duncan, chairman of the Del Norte Healthcare District, said Wood’s legislation is important because of the patients’ concerns about the cost of treatment they receive at Sutter Coast Hospital. Duncan said he, Crescent City Mayor Blake Inscore and Del Norte County Supervisor Chris Howard met with Wood in September to discuss the issue of community benefits and tax-exempt status.
Community benefits is a topic that’s been “under the radar,” Duncan said, but it does factor into the tax-exempt status of Sutter Health.
“A Sutter representative told me they’re using usual and customary rates to report their unreimbursed cost of care,” Duncan said. “Usual and customary rates are far higher than the actual cost of care. The reporting technique inflates the cost of care. It’s important and it’s millions of dollars and Sutter uses those inflated figures to justify the tax exemption.”
According to Duncan, using those inflated figures, Sutter Health gained tax exemption benefits of $288 million, more than it provided in charity care to local taxpayers.
Duncan also noted the issue should be important to people even if they’re not treated at Sutter Coast since Medicare is factored into their health insurance premiums.
“It’s long overdue and I’m glad to see our assembly member is taking the lead,” Duncan said, adding that though the issue likely won’t be on the healthcare district’s agenda for its Tuesday meeting, it will be a topic the district will discuss. “We have three new members who may not be familiar with the background.”
Representatives with Sutter Health, which operates Sutter Coast Hospital, are still reviewing the details of AB 204, according to Amy Thoma Tan, director of public affairs and issues management.
“As part of our not-for-profit mission we are committed to investing in the communities we serve,” Tan told the Triplicate via email Wednesday. “Sutter Health’s total investment in community benefit in 2017 was $612 million. This amount includes traditional charity care and unreimbursed costs of providing care to MediCal patients, as well as investments in health education and public benefit programs such as community clinics and prenatal care for those who are low income.”
The California Hospital Association, which represents the interests of hospitals and health systems with the Legislature and state regulatory agencies, is also still reviewing AB 204, said Jan Emerson-Shea, the association’s vice president of external affairs. Though the association doesn’t yet have a position on the proposed legislation, Emerson-Shea said hospitals have had to file their community benefit plans with the Office of Statewide Health Planning and Development since the mid-1990s. Nonprofit hospitals also file detailed information with the Internal Revenue Service, Emerson-Shea said.
“Standardizing how that’s all reported is something generally we support,” she said, referring to AB 204. “We want to take a look at the fine details (of the proposed legislation) to understand what it all might mean, but we have publicly embraced the idea of public reporting on this for well over 20 years.”
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