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Southland hospitals again criticized for lack of charity care

Monday, September 10, 2007
Special to
by Emily Udell

Slight increase in free care still not enough to satisfy critics
Southland hospitals delivered more dollars of charity care last year but the percentage of free care compared to revenue stagnated and fell short of what some policymakers proposed as fair trade for their tax-exempt status.
Operators of area hospitals provided 26 percent more free and discounted care in 2006 than the year before, but the numbers for individual hospitals fell below the 8 percent of revenue proposed by Attorney General Lisa Madigan last year and even the 5 percent suggested by U.S. Sen. Charles Grassley (R-Iowa) in July.
"There was a slight increase in the percentage of charity care that was being delivered," said Cara Smith, a spokeswoman for the attorney general's office. "The levels are still far below what they should be."
But hospitals continued to argue that charity care is one piece of the puzzle, and the focus on free medical care figures belies the range of benefits hospitals provide in a time when health care providers are facing unprecedented fiscal challenges.
"The charity care figure doesn't fully recognize the breadth and scope of charitable care and services," said Nahlah Diddano, a spokeswoman for Advocate Health Care, which owns Christ Medical Center in Oak Lawn and South Suburban Hospital in Hazel Crest.
"Secondly, the majority of hospitals and health care systems are financially strained," she said.
Madigan cracks down
Operators of Southland hospitals boosted charity care dollars to $85.9 million in 2006 from $69.1 million in 2005, according to recent filings with the attorney general. But charity care ranged from less than 1 percent to nearly 3 percent of patient revenue.
And critics contend these amounts are negligible.
Last year, Madigan's office slammed nonprofit hospitals for their low numbers, saying they weren't holding up their end of the bargain. But she backed off on threats to pursue legislation that would require a minimum percentage of charity care, and Smith said their office has been meeting with hospitals across the state to discuss charity care.
"We have been in discussions and negotiations, and those we believe will be the most productive way of getting at this issue," she said.
Madigan's office on Friday also appealed a July circuit court ruling that re-instituted the tax-exempt status of Provena Covenant Medical Center in Urbana. The hospital was denied its exemption in 2003 when tax officials decided the facility did not provide enough free care.
Critics have targeted nonprofit hospitals because the state constitution grants nonprofit hospitals - including all Southland hospitals - breaks on property, sales and income tax, as well as tax-free bonds to finance construction projects.
"There is a culture in Illinois of nonprofit hospitals shirking their responsibility to provide charity care," said Mike Truppa, a spokesman for the Service Employees International Union's Hospital Accountability Project, which advocates for legislation that would require hospitals to provide a set level of charity care.
"There has to be a policy change because it has been shown that when left to their own devices, hospitals don't live up to their obligation," he said.
St. James Hospital and Health Centers, with campuses in Chicago Heights and Olympia Fields, gave the highest level of charity care among Southland hospitals at 2.9 percent, up from 2.3 percent in 2005. Blue Island's St. Francis Hospital and Health Center, which was put up for sale earlier this year, gave the smallest amount of charity care at 0.7 percent, up from 0.3 percent in 2005.
Hospitals speak out
Hospitals argued that charity care is only one way they give back to the community, saying they absorb bad debt and provide free community education.
"The attorney general and others are looking to make it black and white that our hospitals are or are not doing enough," said Peter J. Murphy, president of St. James Hospital and Health Centers.
"We are providing a lot of charity, however one is finding charity care in the arithmetic," he said.
Advocate touted its total community benefit in 2006 as $296 million, and the Illinois Hospital Association reports the community benefit for hospitals statewide is $4.2 billion. These figures include services such as donation of meeting space, training for health care professionals, language assistance and fitness events.
"There isn't a problem to be solved because hospitals are doing their fair share," said Howard Peters, senior vice president of the hospital association.
Senator weighs in
But Grassley, ranking member of the Senate Committee on Finance, disagreed. He decried the lack of accountability after an Internal Revenue Service report that was released in July found 22 percent of nonprofit hospitals nationwide reported providing less than 1 percent of revenue in charity care and 21.6 percent reported providing less than 2 percent.
He said there was inconsistency in defining charity care, that some hospitals were inflating costs and some failed to promote charity care in their communities.
The Chicago-based American Hospital Association blistered at the IRS's draft of a new form aimed at making tax-exempt hospitals more transparent in their reporting of community benefits.
"In too many instances, hospitals would experience extraordinary burdens gathering and reporting the requested information - information that is often unrelated to compliance," wrote the association's general counsel Melinda Reid Hatton in a strongly-worded 11-page letter to the IRS on behalf of its 5,000 member hospitals in late August.
The letter reiterated the argument that Medicare underpayments and bad debt should be lumped in with charity care, and that hospitals should be recognized for the broader community benefits they provide.
"The IRS should be concerned that any decision not to include this category could discourage the provision of these community benefits by hospitals, and therefore, leave the community without the services upon which it relies," Hatton wrote.
But critics said hospitals' pleas to put other benefits under the charity care umbrella were an effort to avoid their obligation to provide free and discounted care in exchange for tax breaks.
"Bad debt is not a community benefit," said Mark Rukavina, executive director of the Boston-based patient advocacy group Access Project.
"If someone goes to Sears and writes a bad check and Sears writes it off, do they say it's a community benefit?"
The IRS is slated to institute new rules in 2008, and the deadline for comments is Sept. 14.
Hospitals also came under fire from county officials last week when Cook County commissioners William Beavers and Joseph Mario Moreno presented a resolution urging the Cook County state's attorney's office to withhold tax breaks from area hospitals that do not provide an adequate amount of free care.
The board voted to send the measure to its finance committee. The nonbinding resolution did not specify an amount of charity care hospitals should be required to provide.
A recent post on Metropolitan Chicago Healthcare Council's Web site said requiring all nonprofit hospitals to adhere to a uniform or standard community benefit was a "one-size-fits-all approach" that fails to account for the unique characteristics of hospitals across the state, such as location and population served.
The government's share
St. James' Murphy said policymakers are trying to put the blame for a flawed health care system on hospitals, pointing to the rising number of uninsured and underinsured people and shortfalls in government subsidies for Medicare and Medicaid coverage.
"Why don't we turn a finger back at the government? Why don't we share the responsibility of reforming our health care system, which is failing to meet the health care needs of the people in our country?" he said.
But Jim Unland, president of the Health Capital Group, a Chicago-based consultancy, said for-profit hospitals, which do not enjoy the tax breaks that nonprofit hospitals do, face the same financial pressures and provide a similar level of charity care.
"It's basically viewed by the for-profit sector as an unfair subsidy and a significant lack of differentiation," he said. "The nonprofit sector has got to provide more charity care and treat the uninsured more equitably or they are going to continue to be attacked."

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