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Many private nonprofit California hospitals, especially those that are part of big corporate chains like Sutter and Kaiser Permanente appear to be exploiting their tax-exempt status by accumulating huge profits, and handing top execs massive pay packages while providing scant charity care in return.

That’s the finding of a new report by the Institute for Health and Socio-Economic Policy, research arm of the California Nurses Association/National Nurses United, that was presented Wednesday in a Sacramento legislative hearing.

The nurses urged legislators to pass legislation to rein in the abuses by requiring minimum levels of charity care that all hospitals must provide to keep their tax exempt status, as well as more rigorous reporting requirements with real penalties attached for violators.

Rally 4

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Nurses rally on steps of state Capitol in Sacramento Wednesday

The findings were presented to a special California Senate Select Committee on Charity Care and Nonprofit Hospitals chaired by State Sen. Ellen Corbett.

In California, non-profit hospitals harvested more than $1.8 billion in government subsidies and benefits from their tax exempt status beyond what they provided in charity care in 2010.

The impact is especially severe on struggling cities and counties. They lose more than $1 billion as a result of the tax exemption of nonprofit hospitals, and what local governments pay directly to hospitals in their communities to provide hospital care for the poor.

Shockingly, many non-profit hospitals actually provide “significantly less” charity care than do for-profit hospitals, State Board of Equalization member Betty Yee said at the hearing.
Several of the state’s biggest and best known hospitals, Cedars Sinai Medical Center, Stanford University Hospital, and Sutter Health’s California Pacific Medical Center and Alta Bates Medical Center, are the biggest abusers in racking up government subsidies in the form of favorable tax benefits beyond what they give back in charity care.

Among the big non-profit chains, which sometimes act more like JP Morgan or Goldman Sachs than they do centers for providing therapeutic care and healing, Sutter and Kaiser are particularly egregious. The two corporate giants make up over 45 percent of the total tax benefits for all California non-profits, and were near the bottom in percentage of charity care they provide relative to their profits.

Further, the report noted 100 top executives at California nonprofit hospitals who take home more than $1 million in pay packages, nearly half of them at Sutter and Kaiser alone.

The IHSP/CNA report follows the release last week of another report on non-profit hospitals by the California State Auditor. Speaking at the hearing, Grant Parks, Principal Auditor of the Auditor’s Office, noted that “state law does not require specific amounts of community benefit to justify (hospital’s) tax exempt status.” State law, he said, “is fairly permissive on what can be counted as community benefit…It’s like the Wild West of what is required.”  

Ellen Shaffer, director of the EQUAL Health Network, a project of the Center for Policy Analysis, noted that, unlike California, 11 states can suspend tax exempt status, Texas and Alabama require specific thresholds for how much charity care a non-profit must provide, and Indiana, Maryland, and Texas levy civil penalties for late filings of reports – all of which are well beyond what California requires.

Lighty emphasized the disparity in what the non-profit hospitals provide, and cited an example from the Auditor’s report. The Auditor cited Sutter’s California Pacific Medical Center and found that the level of charity care as a percentage of profits was 17 percent for CPMC’s St. Luke’s Hospital, which serves a working class and low income community, compared to just 4 percent for CPMC other facilities that cater to wealthier neighborhoods.

Same city, San Francisco, same hospital system, great disparity, Lighty noted. If a level playing field is not established, those hospitals serving lower income communities and doing more to meet their obligation will be the ones most in danger of closing, just as Sutter/CPMC has been trying to do with St. Luke’s

It’s well past time, said CNA Co-President DeAnn McEwen, RN,, “that private hospitals and multispecialty clinics operated by nonprofit corporations actually meet the social obligations for which they receive favorable tax treatment and patients receive the care they need.”  

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Comment Preferences

  •  the whole non-profit area is being (12+ / 0-)

    abused and misused, not just the hospitals.  And yes,  too often, savings from tax exemption don't translate into charity or public service, but into salaries for top administrators, perks, and bulding up assets that give power and access politically to the administrations, who obtain even more favorable treatment, influence legislation and still don't result in patient care gains.

    •  it's pretty bad (3+ / 0-)
      Recommended by:
      jfromga, silverthread, FarWestGirl

      in a lot of the big arts organizations like opera companies, symphony orchestras and big museums.

      when i was dating an employee at SFMOMA back in the 90s, he told me that the (then) general director was not only making a very sweet salary but had also wangled the board to pay to have his house wired for the most state of the art internet service at the time and a whole batch of other perks.

      in one sense, i agree, the administrators of these institutions do need to be compensated for their work-running things like hospitals, opera companies and really big museums is a lot of work.  

      on the other hand, a visit to kaiser once cost me $140 out of pocket one afternoon because first, i went to my own doctor but was told i couldn't be helped that afternoon ($20 co-pay for that) and sent to the emergency room to be examined ($100 co-pay for that) and then sent to a specialist for further examination ($20 co-pay for that).  

      if the administrators could handle a little less in compensation, perhaps i could have only had to make one co-pay since, technically, i only set foot in that hospital one time.

      hope springs eternal and DAMN is she getting tired!

      by alguien on Thu Aug 16, 2012 at 04:33:58 PM PDT

      [ Parent ]

  •  Here's the root of the problem: (10+ / 0-)

    When the logic of your whole health care system is the logic of business, then even the parts of it that aren't supposed to be that way will be infused with that logic.  The non-profits act pretty much like the for-profits.  The supposedly religiously motivated act just like the dollar-driven.  Even the public sector absorbs that logic: You hear all the time about the local county hospital "loosing money".  Do you hear about the county sheriff, or jail, or road department losing money?  Of course not - they aren't expected to make money, they are expected to provide effective service.  Why should only the hospital, of all public services be judged by that standard?  Because, here in America (and pretty much nowhere else) healthcare is first and foremost a business.  That's the dynamic we really need to change.  And eventually will, but only after trying every other possible wrong solution.

    "Wouldn't you rather vote for what you want and not get it than vote for what you don't want - and get it?" Eugene Debs. "Le courage, c'est de chercher la verite et de la dire" Jean Jaures

    by Chico David RN on Thu Aug 16, 2012 at 03:37:00 PM PDT

    •  Numerous Countries Use Nonprofit Commercial (3+ / 0-)
      Recommended by:
      jgilhousen, silverthread, FarWestGirl

      insurance rather than government single-payer, and they're among those leading us substantially in health systems and spending only a fraction what we do on care.

      I don't know about profit or nonprofit hospitals in other systems, but the insurance experience shows that it's logistically possible to regulate a nonprofit business appropriately.

      Of course all those countries regulate business especially at the top end more tightly than we do.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Thu Aug 16, 2012 at 03:45:59 PM PDT

      [ Parent ]

  •  You are performing an invaluable function (12+ / 0-)

    in shining a spotlight on these abuses.

    Tipped and rec'd. And bless the CNA.

    It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

    by karmsy on Thu Aug 16, 2012 at 03:41:30 PM PDT

  •  Besides what the (4+ / 0-)

    diarist pointed out, nonprofits can be havens for nepotism and waste.

    The executives at nonprofits are just like their counterparts in the for profit world-they all think they deserve a six figure salary, and they all agitate for more and more and more.

    I temped at a small nonprofit, only about 40 employees, and the exec, who was making 6 figures, gave himself a bonus of $10,000.  Nobody else, of course, deserved any bonus.  

    Then at another nonprofit, with only about 20 employees, the exec dir makes six figures.  

    Then at another nonprofit I was at for a year, the exec dir of course laid off people, discontinued a mobile clinic, all while giving himself and his cronies big raises and bonuses [but he did give the employees a small raise, too].  Then he had his daughter working there for over 3 years; then one of the accountants got her foster daughter a job there even though she had no case management experience--this happened in 2010--so it would be impossible for the company not to have received numerous applications from experienced case managers, but the unqualified relative got the job.  Then a director's relative recieved free services from the entity--even tho the director is fairly wealthy [I corroborated this with the case manager who provided the service and the program director].  THe director's relative was also bumped ahead of the line for services.

    So, I think disclosures of relatives who are employed at the nonprofit should be required in the 990, along with the business interests of the employees and directors of the nonprofit.

    The banks have a stranglehold on the political process. Mike Whitney

    by dfarrah on Thu Aug 16, 2012 at 04:06:24 PM PDT

  •  In my state of Illinois, we have (4+ / 0-)

    an Attorney General named Lisa Madigan (a Democrat...imagine that) who several years ago began going after the state's NFP hospitals over this very issue.

    Anne Romney's full quote: You people......should eat cake.

    by jazzmaniac on Thu Aug 16, 2012 at 05:22:24 PM PDT

  •  Need a standard in determining non-profit status.. (0+ / 0-)

    There needs to be a standard in determining who can call themselves a non-profit! If a hospital is cutting acute services, using aggressive debt collectors against low-income patients, and giving CEOs large unecessary bonuses (cough, Sutter, cough cough), then they need to be considered for-profit and pay their fair share of taxes like other for-profit hospitals!

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