Noting the connection with its fight for transparency at Sutter Coast Hospital, the Del Norte Healthcare District pledged its support for a proposed bill that addresses how nonprofit hospitals report the value of community benefits.

The Healthcare District on Tuesday voted 4-0-1 in favor of a letter of support for Assembly Bill 204, which was drafted earlier this year by Assemblyman Jim Wood, who represents the North Coast. Healthcare District directors approved expenses for its chairman, Dr. Greg Duncan, to travel to Sacramento with county and city representatives to advocate for the bill as it moves through the legislative process.

Healthcare District representatives also appointed Duncan and one of its newest members, Michael Young, to serve on a committee that will meet with Del Norte County supervisors and Crescent City Councilors to discuss the proposed legislation at a March 7 meeting. Director Dohn Henion was absent.

According to Duncan, Wood and his staff drafted AB 204 after he, then Board of Supervisors chairman Chris Howard and Crescent City Mayor Blake Inscore met with the assemblyman in September. The three local representatives sought to discuss the impact of rising health care costs in Del Norte County, Duncan said. Wood and his chief of staff suggested focusing on the “manner by which nonprofit hospitals report on the charity care that they have provided to communities,” Duncan said.

Community benefits includes services a nonprofit hospital provides to vulnerable populations, charity care, its support of public health programs and donations of money or resources that contribute to a community priority, according to a press release Wood’s office issued when he introduced the bill Jan. 14.

If approved, AB 204 would establish a uniform set of standards for how nonprofit hospitals calculate and report the value of those community benefits, according to Wood’s office. The bill would require systems with one or more hospitals to report the information separately for each of its facilities.

AB 204 would also prohibit a hospital from including certain costs such as fundraising and compliance expenses in the calculation of its community benefits costs. Regulators would have the ability to assess fines against hospitals failing to provide community benefit plans and reports if the bill passes, according to Wood’s office.

Nonprofit hospitals have been required to develop community benefit plans since 1996, describing how they meet its community’s needs through the provision of community benefits, which gives hospitals certain tax advantages.

In a written statement after he introduced the bill, Wood said because there is no standard method for calculating the actual value of those community benefits, it’s difficult for communities to assess that value in exchange for a nonprofit hospital’s tax-exempt status.

On Tuesday, Duncan suggested adding a sentence in the Healthcare District’s support letter encouraging Wood to include language in the legislation that would use the MediCare allowable reimbursement amount for each inpatient and outpatient service nonprofit hospitals provide as the standard charity care reporting would be compared to.

“If you just report your costs but you have no frame of reference to compare them to, then there’s a lot of potentially inflated costs in that number,” Duncan said. “It would be very helpful if they’re reported out as a percentage of what MediCare would allow for the service that was provided, that way we’ll have a national and very well established comprehensive standard.”

According to Duncan, the hospital that serves Del Norte County, Sutter Coast, doesn’t currently disclose a calculation of the community benefits it provides despite repeated letters of request from the Healthcare District. He said a letter Sutter Coast Hospital sent in response to the Healthcare District’s requests was “incomplete and vague” and noted that he found a flier the hospital issued in 2016 stating that it paid $3,333,683 in charity care in 2016.

“What we don’t know is where that number comes from,” Duncan said. “Is that real money that they paid? I see the word paid and I wonder who they paid it to and how it was calculated. We don’t know. Our efforts to find an answer to that question were fruitless thus far and Sutter said they consider themselves a private corporation meaning they don’t have to disclose that information.”

However, Duncan said, Sutter Coast Hospital is exempt from paying local, state and federal taxes.

During public comment, Howard, who represents District 3 on the Board of Supervisors and was succeeded as chair by District 2 representative Lori Cowan, said AB 204 is the first piece of legislation drafted specifically in response to concerns from Del Norte County.

Del Norte County representatives have asked for legislation to address community benefits and charity care reporting for more than a decade, Howard said.

“It’s important legislation because it not only reflects the needs this community has rallied for in conjunction with the Healthcare District, the county and the City Council, it carries the needs for an entire state in the fact that there’s a lot of not-for-profit hospitals not only in the state of California, but in the United States,” Howard said.

Howard noted the bill will move through the legislative process quickly and will be met with resistance and urged healthcare district members to take an active role in advocating for its passage.

“In the letter that Dr. Duncan has provided today there’s a request for travel,” Howard said. “This is going to be very important to follow through this legislation through the committee, both the health committee, which Dr. Wood currently chairs, and the finance committee and several others.”

The first committee meeting at the state legislative level that will address AB 204 is on March 19, Howard said.

Howard also noted that the issue of charity care reporting among nonprofit hospitals has been addressed on a national scale by U.S. Sen. Chuck Grassley, who represents Iowa. Grassley addressed the issue in 2018 as chair of the Senate Finance Committee, Howard said, adding that there are 3,000 nonprofit hospitals nationwide.

Howard also referred to a Feb. 19, 2019 letter Grassley sent as Finance Committee chair to Charles Rettig, commissioner of the Internal Revenue Service, noting that some tax-exempt hospitals have cut charity care despite increased revenue “calling into question their compliance with the standards set by Congress.” Grassley asked Rettig to find out if that trend was continuing and what explains that trend.

Howard said “these are the same questions this community has been asking, not only of our local hospital, but also of our state legislators.”

“I’d encourage you to come before the Board of Supervisors and the City Council to continue to engage and more importantly pass through a resolution, or whatever you see fit, (for) the travel expenses that will be necessary to ensure this legislation is carried forward,” Howard said.

In Jan. 16, after Wood introduced AB 204 in the Assembly, Amy Thoma Tan, director of public affairs and issues management for Sutter Health, told the Triplicate that the health care system’s total investment in community benefits for 2017 was $612 million, including traditional charity care and unreimbursed costs of providing care to MediCal patients. That $612 million also includes investments in health education and public benefit programs such as community clinics and prenatal care for low-income patients, Thoma Tan told the Triplicate.

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