Monday, April 6, 2009

Non-Profit?

In the Cleveland Plain Dealer today is a front page report on the amount of charity care provided by the three main private (but non-profit) hospitals in the metro-Cleveland area. On average, the Cleveland Clinic, University Hospitals, and Sisters of Charity spent just over 2% of their revenue on the provision of charity care in 2007.

Because of the work of Senator Charles Grassley, all non-profit hospitals will be required to disclose information on how much free care they provide, starting in 2009. These large institutions have come under fire recently because of the tax breaks they receive from being "non-profit" hospitals. Particularly in Cleveland, where the safety net hospital (MetroHealth) had to cut jobs and services just to break even, this sort of transparency will be crucial to ensure that such tax breaks are justified and that everyone is (in the words of President Obama) "doing their fair share". It seems to me that 2% is a rather paltry number, especially given the other expensive projects that The Clinic seems to have the funds for, in Las Vegas and Abu Dhabi.

In this era of federal bailouts and car company executives being fired by our President, it doesn't seem unreasonable anymore for a "non-profit" hospital to be required to allocate a little more than 2% of revenue toward charity care if they want to continue to be exempt from the prying fingers of the IRS....

6 comments:

Anonymous said...

Interesting about Cleveland Clinic providing the charity care. In our neck of the woods, the Cleveland Clinic surgeons won't except many of the Medicaid HMOs, so their family practice docs (as you know, Cleveland Clinic employs their docs) actually have to refer outside their venue for lap chole, breast surgeries, etc.

M. Student said...

Absolutely agreed.

Jen said...

I am, in no way shape or form, an expert on this. But I do work for a non-profit health system in Nebraska and I believe that the non-profit part isn't simply about charity care. It also has to do with re-investing into the community. For example, despite the recession we are continuing our expansion - because, frankly, we know there is still a need. We also have "Community Benefit" information that includes many public-private partnerships - like the sponsorship of a healthy living program for kids.

Either way, I agree that 2% does seem pretty low. Our system reports our charity care and community benefit in dollar amounts - but I am now beginning to question what that really is percentage-wise.

Buckeye Surgeon said...

Jen-
What you say is correct. The article in the PD notes that 8-9% of revenues went toward the funding of "community benefit activities". But these are often education/research deals that serve more as glorified public relations efforts. In a city with double digit unemployment like Cleveland, it would seem that a larger chunk of that 9% ought to go toward actual medical care...

Bianca Castafiore said...

Transparency, accountability -- words and notions I like, but only effective if there is a clear standard. Even the 5% mentioned below seems paltry to me...

"Nonprofit hospitals will have to file a new report next year with the Internal Revenue Service — for the first time accounting for the free health care and other benefits they provide to justify their tax breaks. The move is one of several measures being taken by federal, state and local governments to make nonprofit hospitals prove they deserve their tax-free status or pay up. The pressure could increase in Wisconsin and elsewhere this year because of budget shortfalls stemming from the economic recession, observers say. 'I expect a resurgence of interest among municipalities in extracting payments in lieu of taxes,' said Alan Zuckerman, a health-care consultant in Philadelphia. 'Municipal budgets are going to be strained. Not-for-profits are a logical target.' . . . Nationally, a bill to be introduced in Congress soon would require nonprofit hospitals to spend at least 5 percent of their budgets on charity care. Meanwhile, a decision in Illinois to strip a hospital of its tax exemption is headed for the state Supreme Court. The state says the hospital provided too little charity care. Hospitals are closely following the Illinois case as a possible sign of challenges to come, said James Orlikoff, a health-care consultant in Chicago." From Nonprofit Law Prof Blog:
http://lawprofessors.typepad.com/nonprofit/2009/01/nonprofit-hospi.html

Anonymous said...

The Abu Dhabi Hospital is being financed entirely by UAE. Not one dime is being spent on capital by the clinic. The Clinic is acquiring a fee for management of the hospital.

- Jeff