Clear Standards for Charity Care for Nonprofit Hospitals

03-11-top7-UPMC-Logo*750Little Rock    For millions there is a collective sigh of relief as 6-3 affirmation of the Affordable Care Act subsidies for low income Americans sinks in and allows us to stop pinching our arms about whether or not this is real. If there’s anything we’ve learned, it’s that the Supreme Court can “giveth,” as it did with Obamacare, and it can “taketh away,” as it did with the Presidency some years ago. More than 1200 rural hospitals, many of them nonprofits, were reportedly ecstatic at the decision since many, if not most, run deficits every year, so knowing there is going to be insurance matters hugely. Other hospitals and health insurers were also relieved.

For the more than 30 states still not operating exchanges, and in most cases not having expanded coverage for their uninsured who would be eligible for expanded Medicaid, this decision should mean that it’s time for an end to posturing and some serious business. In the meantime, the urgency of compelling tax exempt, allegedly nonprofit hospitals to provide their fair share of charity care to justify their shopping cart full of benefits in many states, is immediate.

It was initially intimidating to look more deeply at the giant University of Pittsburgh Medical Centers (UPMC) after my visit there recently because of its size and scope. Fortunately in some early window shopping, our Pittsburgh affiliate stumbled immediately on a fascinating document written by a locally prominent law firm at the request of the Alleghany solicitor on whether or not UPMC truly qualified for any sales, property, or other tax benefits based on alleged nonprofit and charitable status. The 13-page memorandum said it would be a lift given the firepower UPMC would bring to the battle, but firmly argued throughout the review that according to Pennsylvania law and court decisions they felt there was no doubt that UPMC did not meet all of the required five tests.

For a minute let’s just look at the tests, rather than at UPMC or any other hospital’s failures, because the Pennsylvania courts provide a useful guide everywhere for judging nonprofit hospitals and others.

· Advances a charitable purpose;
· Donates or renders gratuitously a substantial portion of its service;
· Benefits a substantial and indefinite class of persons who are legitimate subjects of charity;
· Relieves the government of some of its burden; and
· Operates entirely free from private profit motive.

When the modest average nationally for the provision of charity by nonprofit hospitals is 6% and hospitals are routinely failing this measure even under the most bend-over-backward liberality, we clearly have a problem. UPMC for example seems to toggle between a bit over 1% and 3% using a standard that goes way past liberality in counting things as charitable. The vast array of for profit enterprises nested in so many of these hospital systems as well as their lengthy and harsh recitation of procedures to squeeze every penny from the poor, would seem to disqualify many on the “private profit motive” count. Defining a “substantial portion” as even 6% also seems a bridge to far to stretch to define something as charitable. Seeing their service area and client base as a “substantial…class…who are legitimate subjects of charity,” would also leave many institutions lacking as they shutter inner city facilities and build grant suburban monuments to their pride and profit, rather than their mission.

Nonetheless, these five rules in Pennsylvania might be useful in setting the standards for hospitals everywhere, even if Pennsylvania hasn’t quite gotten around to enforcing their rules within their own boundaries yet.

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Please enjoy Compound Fracture by My Morning Jacket.  Thanks to Kabf.

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