BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 346    
           --------------------------------------------------------------- 
          |AUTHOR:        |Wieckowski                                     |
          |---------------+-----------------------------------------------|
          |VERSION:       |April 23, 2015                                 |
           --------------------------------------------------------------- 
           --------------------------------------------------------------- 
          |HEARING DATE:  |April 29, 2015 |               |               |
           --------------------------------------------------------------- 
           --------------------------------------------------------------- 
          |CONSULTANT:    |Vince Marchand                                 |
           --------------------------------------------------------------- 
          
           SUBJECT  :  Health facilities: community benefits.

           SUMMARY  :  Repeals the existing hospital community benefit law,  
          and establishes a new hospital community law to require private  
          non-profit hospitals to complete a community needs assessment,  
          followed by a community benefits plan. Defines "community  
          benefit" and other terms for purposes of this bill, and requires  
          90 percent of a private non-profit hospital's community benefit  
          moneys to be allocated to charity care and projects that improve  
          community health for underserved and vulnerable populations, as  
          defined. 

          Existing law:
          1.Establishes the hospital community benefit law (existing CBL),  
            which establishes requirements on private non-profit hospitals  
            to complete a community needs assessment and adopt a community  
            benefits plan, to annually submit this community benefit plan  
            to the Office of Statewide Health Planning and Development  
            (OSHPD), along with a report of the economic value of  
            community benefits provided in furtherance of the plan. 
             
          2.Defines "community benefit plan," for purposes of the existing  
            CBL, as a written document prepared for annual submission to  
            OSHPD, that includes a description of the activities that the  
            hospital has undertaken in order to address identified  
            community needs within its mission and financial capacity, and  
            the process by which the hospital developed the plan in  
            consultation with the community.

          3.Defines "community benefit," for the purposes of the existing  
            CBL, as a hospital's activities that are intended to address  
            community needs and priorities primarily through disease  
            prevention and improvement of health status, including, but  







          SB 346 (Wieckowski)                                Page 2 of ?
          
          
            not limited to, any of the following:

                  a.        Health care services rendered to vulnerable  
                    populations, including charity care and the  
                    unreimbursed cost of providing services to the  
                    uninsured, underinsured, and those eligible for  
                    Medi-Cal, Medicare, California Children's Services  
                    Program, or county indigent programs;
                  b.        The unreimbursed cost of services provided  
                    related to community-oriented wellness and health  
                    promotion, prevention services such as health  
                    screenings and immunizations, adult day care, child  
                    care, medical research, medical education, nursing and  
                    other professional training, home-delivered meals to  
                    the homebound, sponsorship of free food and shelter to  
                    the homeless, and outreach clinics in  
                    socioeconomically depressed areas;
                  c.        Financial or in-kind support of public health  
                    programs;
                  d.        Donation of funds, property, or other  
                    resources that contribute to a community priority;
                  e.        Health care cost containment;
                  f.        Enhancement of access to health care or  
                    related services that contribute to a healthier  
                    community;
                  g.        Services offered without regard to financial  
                    return because they meet a need in the service area of  
                    the hospital; and,
                  h.        Food, shelter, clothing, education,  
                    transportation, and other goods or services that help  
                    maintain a person's health.

          4.Requires private, non-profit hospitals, under the existing  
            CBL, to complete, either alone or in conjunction with other  
            health care providers, a community needs assessment evaluating  
            the health needs of the community serviced by the hospital,  
            that includes a process for consulting with community groups  
            and local government officials, and to update the community  
            needs assessment at least once every three years.

          5.Requires private, non-profit hospitals, under the existing  
            CBL, to annually adopt and update a community benefits plan  
            for providing community benefits either alone, or in  
            conjunction with other health care providers, or through other  
            organizational arrangements. Requires the community benefits  








          SB 346 (Wieckowski)                                Page 3 of ?
          
          
            plan to include the following elements:

                  a.        Mechanisms to evaluate the plan's  
                    effectiveness, including a method for soliciting the  
                    views of the community served by the hospital;
                  b.        Measurable objectives to be achieved within  
                    specified timeframes;
                  c.        Community benefits categorized into the  
                    following categories: medical care services, other  
                    benefits for vulnerable populations, other benefits  
                    for the broader community, health research and  
                    training programs, and nonquantifiable benefits.

          6.Requires private, non-profit hospitals, under the existing  
            CBL, to annually submit its community benefit plan, including  
            activities the hospital has undertaken in order to address  
            community needs, to OSHPD, and to the extent practicable,  
            assign and report the economic value of community benefits  
            provided in furtherance of its plan.

          This bill:
          1.Repeals the existing CBL law, and establishes a new CBL for  
            private non-profit hospitals and non-profit multispecialty  
            clinics (collectively, non-profit facilities), as these  
            facilities are defined. Makes the repeal of the old CBL law,  
            and the operative date of the new CBL law, effective as of the  
            date of the adoption of regulations by OSHPD prescribing a new  
            standardized format for community benefits plans,

          2.Requires, by January 1, 2018, each private non-profit facility  
            to develop, in collaboration with the community benefits  
            planning committee, a community health needs assessment that  
            evaluates the health needs and resources of the community it  
            serves. Requires facilities, prior to completing this  
            assessment, to develop a community benefits statement that  
            describes the facility's commitment to developing, adopting,  
            and implementing a community benefits program. Requires  
            private non-profit facilities to file the community health  
            needs assessment with OSHPD, and to update its community needs  
            assessment at least every three years.

          3.Requires, by April 1, 2018, each private non-profit facility  
            to develop, in collaboration with the community, a community  
            benefits plan designed to achieve all of the following  
            outcomes:








          SB 346 (Wieckowski)                                Page 4 of ?
          
          
                  a.        Access to health care for members of  
                    underserved and vulnerable populations;
                  b.        Addressing of the essential health care needs  
                    of the community, with particular attention to the  
                    needs of members of underserved and vulnerable  
                    populations; 
                  c.        Creation of measurable improvements in the  
                    health of the community, with particular attention to  
                    the needs of members of underserved and vulnerable  
                    populations.

          4.Defines "community" as the service area or patient population  
            for which a non-profit facility provides health care services.  
            Prohibits a non-profit facility from defining its service area  
            to exclude vulnerable populations, including, but not limited  
            to, medically underserved, low-income, or minority populations  
            who are part of its patient populations, live in geographic  
            areas in which its patient populations reside, or otherwise  
            should be included based on the method the hospital facility  
            uses to define its community.

          5.Defines "community benefits" as the unreimbursed goods,  
            services, activities, programs, and other resources provided  
            by a non-profit facility that addresses community-identified  
            health needs and concerns, particularly for people who are  
            uninsured, underserved, or members of a vulnerable population,  
            including, but not limited to, the following: 

                  a.        Charity care; 
                  b.        Shortfalls in Medi-Cal, the California  
                    Children's Program, or county indigent programs at a  
                    cost up to 125 percent of the Medicare rate for the  
                    health care services or items provided on an inpatient  
                    basis, an outpatient basis, or through other  
                    non-profit or public outpatient clinics, hospitals, or  
                    healthcare organizations;
                  c.        The cost of community building activities for  
                    vulnerable populations;
                  d.        The cost of community health improvement  
                    services and community benefit operations;
                  e.        The cost of school health centers as defined;
                  f.        The cost of health professions education and  
                    training provided without charge; 
                  g.        Amounts given, with no expectation of  
                    repayment, to employees from, or working among, a  








          SB 346 (Wieckowski)                                Page 5 of ?
          
          
                    vulnerable population, for student loan repayment;
                  h.        Subsidized health services for vulnerable  
                    populations; 
                  i.        Vaccination programs; 
                  j.        Chronic illness prevention programs and  
                    services for vulnerable populations;
                  aa.       Home-based health care programs for vulnerable  
                    populations;
                  bb.       Community-based mental health programs for  
                    vulnerable populations; and,
                  cc.       Outreach and assessment programs for  
                    vulnerable populations.

          6.Excludes the following from the definition of "community  
            benefits:" 
                  a.        The unreimbursed cost of providing services to  
                    those enrolled in Medicare or any goods, services,  
                    activities, programs, or other resources program or  
                    activity for which there is direct offsetting revenue;  

                  b.        Uncollected fees or accounts written off as  
                    bad debt;
                  c.        Contractual adjustments in the provision of  
                    health care services below the amount identified as  
                    gross charges or "chargemaster" rates by the health  
                    care provider.
                  d.        Any amount over 125 percent of the Medicare  
                    rate for the health care services or items provided on  
                    an inpatient or outpatient basis
                  e.        Any amount over 125 percent of the Medicare  
                    rate for providing, funding, or otherwise financially  
                    supporting health care services or items with no  
                    expectation of payment provided to financially  
                    qualified patients through other non-profit or public  
                    outpatient clinics, hospitals, or health care  
                    organizations.

          7.Requires a private non-profit facility, beginning after April  
            1, 2018, to annually submit to OSHPD a community benefits plan  
            that conforms to this bill no later than 120 days after the  
            end of the facility's fiscal year. Requires the plan to  
            include, if applicable, a report on the community benefits  
            efforts of the preceding year, including the amounts and types  
            of benefits provided, a description of the facility's progress  
            toward meeting its goals and objectives, and an evaluation of  








          SB 346 (Wieckowski)                                Page 6 of ?
          
          
            the plan's effectiveness.

          8.Defines "community building activities," for purposes of the  
            community benefit definition, as the cost of various kinds of  
            community building activities, including physical improvements  
            and housing, economic development, community support,  
            environmental improvements, community health improvement  
            advocacy, coalition building, workforce development, and  
            leadership development and training for community members. 

          9.Defines "charity care," for purposes of the community benefit  
            definition, as the unreimbursed cost to a non-profit facility  
            of providing services to the uninsured or underinsured, as  
            well as providing health care services or items on an  
            inpatient or outpatient basis to a financially qualified  
            patient, as defined, with no expectation of payment.

          10.Excludes from the definition of "charity care" any of the  
            following:

                  a.        Uncollected fees or accounts written off as  
                    bad debt;
                  b.        Care provided to patients for which a public  
                    program or public or private grant funds pay for any  
                    of the charges for the care;
                  c.        Contractual adjustments in the provision of  
                    health care services below the amount identified as  
                    gross charges or "chargemaster" rates by the health  
                    care provider;
                  d.        Any amount over 125 percent of the Medicare  
                    rate for the health care services or items provided on  
                    an inpatient or outpatient basis; and,
                  e.        Any amount over 125 percent of the Medicare  
                    rate for providing, funding, or otherwise financially  
                    supporting health care services or items with no  
                    expectation of payment provided to financially  
                    qualified patients through other non-profit or public  
                    outpatient clinics, hospitals, or health care  
                    organizations.

          11.Requires the community benefits planning committee, as  
            defined, to be composed of the following:

                  a.        One of either the governing board of the  
                    hospital organization that operates the facility or  








          SB 346 (Wieckowski)                                Page 7 of ?
          
          
                    other party authorized by that governing body, or the  
                    governing body of the hospital facility if the  
                    facility has its own governing body;
                  b.        At least one individual from the local,  
                    tribal, or regional governmental public health  
                    department, or an equivalent department, with  
                    knowledge, information, or expertise relevant to the  
                    health needs of that community;
                  c.        At least one individual from an underserved  
                    and vulnerable population, as defined;

          12.Defines "direct offsetting revenue" as the revenue from  
            goods, services, activities, programs, or other resources,  
            which offsets the total community benefit expense of the  
            goods, services, activities, programs, or other resources, and  
            excludes from this definition payments for Medi-Cal, the  
            California Children's Services Program, or county indigent  
            programs.

          13.Defines "non-profit multispecialty clinic" as a clinic,  
            defined in existing law, that is operated by a non-profit  
            corporation exempt from federal income taxation, as specified,  
            that conducts medical research and health education and  
            provides health care to its patients through a group of 40 or  
            more physicians, who are independent contracts representing  
            not less than 10 board-certified specialties, and not less  
            than two-thirds of whom practice on a full-time basis at the  
            clinic.

          14.Defines "private non-profit hospital" as a private non-profit  
            acute care hospital that has been determined to be exempt from  
            taxation under the Internal Revenue Code, and exempts the  
            following from this definition:

                  a.        A district hospital organized and governed  
                    pursuant to the Local Health Care District Law, as  
                    specified, or a non-profit corporation that is  
                    affiliated with the health care district hospital  
                    owner by means of the district's status as the  
                    nonprofit corporation's sole corporate member;
                  b.        A rural general acute care hospital, as  
                    defined;
                  c.        A children's hospital, as defined; and,
                  d.        A multispecialty clinic operated by a  
                    for-profit hospital, regardless of its net revenue.








          SB 346 (Wieckowski)                                Page 8 of ?
          
          

          15.Defines "underserved population" or "vulnerable population"  
            as any of the following:

                  a.        A population that is exposed to medical or  
                    financial risk by virtue of being uninsured or  
                    underinsured, as defined, or eligible for Medi-Cal or  
                    county indigent programs;
                  b.        Individuals below 400 percent of the federal  
                    poverty level, unless the hospital serves a county in  
                    which the county has adopted an ordinance to provide  
                    financial assistance for health care to individuals  
                    with incomes above 400 percent of the federal poverty  
                    level, in which case the income threshold for the  
                    vulnerable population shall be the income threshold  
                    adopted by the county;
                  c.        Individuals with limited English proficiency;  
                    or
                  d.        A population that meets the definition of  
                    disadvantaged community pursuant to a provision of law  
                    that requires the California Environmental Protection  
                    Agency to identify communities based on certain  
                    criteria, including areas disproportionately affected  
                    by environmental pollution and other hazards; 

          16.Requires a private non-profit facility, in conducting its  
            community health needs assessment, to solicit comments from,  
            and meet with, local government officials, as well as  
            representatives of vulnerable populations, including diverse  
            racial, ethnic, cultural, and LGBTQQ communities, women's  
            health advocates, mental health advocates, health and mental  
            health providers, community-based organizations and advocates,  
            academic institutions, low-income and vulnerable consumers,  
            health care providers, registered nurses, and community groups  
            representing specified constituencies such as patients, labor,  
            and seniors. Permits a facility to create a community benefits  
            advisory committee for the purpose of soliciting community  
            input.

          17.Requires a private non-profit facility, in preparing its  
            community health needs assessment, to use available public  
            health data, including any health equity assessment conducted  
            by the Office of Health Equity, as specified, and permits the  
            facility to collaborate with other facilities and health care  
            institutions in conducting community health needs assessments  








          SB 346 (Wieckowski)                                Page 9 of ?
          
          
            and to make use of exiting studies.

          18.Requires private non-profit facilities, not later than 30  
            days prior to completing a community health needs assessment,  
            to make a copy of the assessment available to the public for  
            review and comment.

          19.Requires private non-profit facilities to provide community  
            benefits to the community as follows:

                  a.        Requires a minimum of 90 percent of the total  
                    economic value of community benefits to be allocated  
                    to community benefits that improve community health  
                    for underserved and vulnerable populations or that  
                    address a specific need identified in the community  
                    health needs assessment. Permits, for purposes of this  
                    90 percent allocation, community benefits that improve  
                    community health for underserved and vulnerable  
                    populations to include activities, such as health  
                    professions education and training, which are not  
                    provided exclusively to underserved and vulnerable  
                    populations, if the activity will improve community  
                    health for underserved and vulnerable populations.
                  b.        Requires a minimum of 25 percent of the total  
                    economic value of community benefits to be allocated  
                    to community building activities geographically  
                    located within underserved and vulnerable populations.  

                  c.        Permits community benefits to be allocated for  
                    projects that simultaneously meet both of the above  
                    criteria.

          20.Requires private non-profit facilities, in developing a  
            community benefits plan, to solicit comments from, and meet  
            with, local government officials, including representatives of  
            local public health departments, and to also solicit comments  
            from, and meet with, health care providers, registered nurses,  
            and community groups representing specified constituencies.

          21.Requires a community benefits plan to include, at a minimum,  
            all of the following:

                  a.        A summary of the needs assessment and a  
                    statement of the community health care needs that will  
                    be addressed by the plan;








          SB 346 (Wieckowski)                                Page 10 of ?
          
          
                  b.        A list of the services the private non-profit  
                    facility intends to provide in the following year to  
                    address community health needs identified in the  
                    community health needs assessments, categorized under  
                    the following: charity care, as defined; other  
                    community benefits, as specified; and, community  
                    building activities;
                  c.        A description of the target community or  
                    communities that the plan is intended to benefit;
                  d.        An estimate of the economic value of the  
                    community benefits at cost that the private non-profit  
                    facility intends to provide;
                  e.        A summary of the process used to elicit  
                    community participation in the community health needs  
                                                                                    assessment and community benefits plan design, and a  
                    description of the process for ongoing participation  
                    of community members in plan implementation and  
                    oversight;
                  f.        A list of individuals, organizations, and  
                    government official consulted during the development  
                    of the plan;
                  g.        A description of the intended impact on health  
                    outcomes attributable to the plan, including short-  
                    and long-term measurable goals and objectives;
                  h.        Mechanisms to evaluate the plan's  
                    effectiveness;
                  i.        The name and title of the individual  
                    responsible for implementing the plan; and,
                  j.        The names of individuals on the private  
                    non-profit facility's governing board;

          22.Permits a private non-profit facility to also report on bad  
            debts and Medicare shortfalls, but prohibits these reports  
            from being reported as community benefits and to be calculated  
            based on hospital costs, not charges.

          23.Requires the governing board of a private non-profit facility  
            to adopt the community benefits plan at a meeting that is open  
            to the public. Requires the governing board, no later than 30  
            days prior to the plan's adoption, to make a draft of the plan  
            available to the public, including on its Internet Web site,  
            as well as a notice of the date, time, and location of the  
            meeting at which the community benefits plan is to be voted on  
            for adoption.









          SB 346 (Wieckowski)                                Page 11 of ?
          
          
          24.Requires the governing board of a private non-profit  
            facility, no later than 30 days prior to the plan's adoption,  
            to provide for a process by which individuals and groups may  
            provide written comment on the draft community plan.

          25., local government officials, including representatives of  
            local public health departments, and to also solicit comments  
            from, and meet with, health care providers, registered nurses,  
            and community groups representing specified constituencies.

          26.Permits a person or entity to file comments on a facility's  
            community benefits plan with OSHPD.

          27.Requires a private non-profit facility to make its community  
            health needs assessment and community benefits plan available  
            to the public on its Internet Web site, and requires a copy of  
            the assessment and plan to be given free of charge to any  
            person upon request.

          28.Permits a private non-profit facility, under the common  
            control of a single corporation or another entity, to file a  
            consolidated plan if the distinct needs of the communities  
            served by each hospital in the consolidated plan are  
            identified, and if the plan addresses services in all the  
            categories specified in this bill to be provided by each  
            hospital or clinic under common control of the corporation or  
            entity.

          29.Requires a private non-profit facility to report community  
            benefits in a consistent and comparable manner to all other  
            private non-profit facilities.

          30.Requires OSHPD to develop and adopt regulations by January 1,  
            2017, to prescribe a standardized format for community  
            benefits plans required under this bill, and requires the  
            director of OSHPD, immediately following the adoption of these  
            regulations, to certify the adoption of the regulations in  
            writing, post the written certification to OSHPD's Internet  
            Web site, and deliver it to the Secretary of State, the  
            Secretary of the Senate, the Chief Clerk of the Assembly, and  
            the Legislative Counsel.

          31.Requires OSHPD to develop a standardized methodology for  
            estimating the economic value of community benefits based on  
            the cost to a private non-profit facility. Prohibits the  








          SB 346 (Wieckowski)                                Page 12 of ?
          
          
            economic value of community benefits to exceed the actual cost  
            to a private non-profit facility, nor more than 125 percent of  
            the Medicare rate for the health care services or items  
            provided on an inpatient basis, an outpatient basis, or  
            through other non-profit or public outpatient clinics,  
            hospitals, or health care organizations.

          32.Requires OSHPD, in developing standards of reporting on  
            community benefits, to conform, to the maximum extent  
            possible, to Internal Revenue Service (IRS) reporting  
            standards for those data elements reported to the IRS, but to  
            also include those data elements required under this bill or  
            other state laws, including charity care.

          33.Requires a private non-profit facility to annually file with  
            OSHPD its IRS Form 990, or its successor form, and requires  
            OSHPD to post the form on its Internet Web site.

          34.Requires OSHPD to make public, including on their Internet  
            Web site, a community health needs assessment and community  
            benefits plan and any comments received regarding those  
            assessments and plans.

          35.Requires OSHPD to maintain a public calendar of community  
            benefit adoption meetings held by the governing board of each  
            private non-profit facility, and requires notice of these  
            meetings to be posted no later than 14 days prior to the  
            meeting date.

          36.Requires OSHPD to calculate and make public, for every year  
            that a community benefits plan is submitted, the total value  
            of community benefits provided by each facility.

          37.Provides OSHPD the same ability to assess civil penalties for  
            failure to comply with the reporting provisions of this bill  
            as it already has for a facility's failure to file other  
            required reports.

           FISCAL  
          EFFECT  :  This bill has not been analyzed by a fiscal committee.
           
          COMMENTS  :  
           1.Author's statement.  In exchange for their significant tax  
            exemptions, California's private non-profit hospitals are  
            required to provide community benefits and charity care  








          SB 346 (Wieckowski)                                Page 13 of ?
          
          
            through programs and services aimed at improving community  
            health and promoting wellness such as free nutrition classes,  
            mobile health clinics, health screenings, and disease  
            counseling. However, charity care and community benefits are  
            not uniformly defined or measured. This ambiguity prevents  
            California communities from determining if these hospitals are  
            adequately serving their communities, a duty non-profit  
            hospitals are required to fulfill under state and federal law.  
            The Legislative Analyst's Office found that there is currently  
            no uniform definition or standard for "charity care" in state  
            or federal statute. This lack of a clear benchmark has yielded  
            inconsistent methodologies and incomplete reporting.  
            Consequently, we cannot accurately measure nonprofit  
            hospitals' required financial investments in our communities.  
            We give these hospitals favorable tax treatment, so it makes  
            sense that we come together to establish an appropriate and  
            transparent way to calculate the amount of community benefits  
            we are getting in return. This bill makes no changes to how  
            many community benefits a hospital provides, but it will  
            increase accountability and provide a clearer picture of the  
            level of community benefits invested back into our  
            communities.
            
          2.Background on non-profit hospitals and community benefit  
            requirements.  Non-profit hospitals have traditionally been  
            exempt from federal income taxes based on the IRS' definition  
            of charity, with the IRS stating that, "the promotion of  
            health is considered to be a charitable purpose. A non-profit  
            organization whose purpose and activity are providing hospital  
            care is promoting health and may, therefore, qualify as  
            organized and operated in furtherance of a charitable  
            purpose." For purposes of California taxes, property owned by  
            a non-profit organization that is used exclusively for  
            religious, hospital, charitable, or scientific purposes is  
            exempt from propriety taxes under what is known as the Welfare  
            Exemption. State law also allows non-profit hospitals to be  
            exempt from state income tax. 

            When the Legislature enacted the existing CBL in 1996, the  
            Legislature found and declared that private non-profit  
            hospitals meet certain needs of their communities through the  
            provision of essential health care and other services, and  
            that public recognition of their unique status has led to  
            favorable tax treatment by the government. In exchange, the  
            Legislature declared, non-profit hospitals assume a social  








          SB 346 (Wieckowski)                                Page 14 of ?
          
          
            obligation to provide community benefits in the public  
            interest. The CBL enacted in 1996 requires non-profit  
            hospitals to annually submit a "community benefits plan" to  
            OSHPD, based on a "community needs assessment" that is  
            required to be updated every three years. This CBL includes a  
            definition of "community benefit," which included charity care  
            and the unreimbursed cost of providing services, but does not  
            specifically exclude anything from the definition of community  
            benefit, nor does it define "charity care" itself. While the  
            law requires the plan to be submitted to OSHPD, it does  
            require OSHPD to review the plans to ensure that hospitals are  
            reporting data consistently, and OSHPD does not attempt to  
            standardize these reports.

          3.Senate Office of Research Report. In a report prepared by the  
            Senate Office of Research (SOR) for an August 15, 2012 hearing  
            of the Senate Select Committee on Charity Care and Non-profit  
            Hospitals, about 247 of California's 387 private hospitals may  
            be eligible for certain tax exemptions due to their non-profit  
            status in exchange for providing various community benefits,  
            such as charity care. However, these community benefits are  
            not uniformly defined or measured. This ambiguity makes it  
            challenging to hold hospitals accountable for the special tax  
            benefits they receive and determine if they are providing  
            meaningful community benefits. Furthermore, some studies show  
            many investor-owned hospitals and public hospitals provide  
            charity care and other community benefits similar to or  
            greater than their non-profit counter parts.  The SOR points  
            out that the California Legislative Analyst's Office (LAO), in  
            an analysis of the Charity Care Act of 2012, indicates that  
            there is currently no uniform definition of charity care nor a  
            requirement in State or federal law for non-profit hospitals  
            to provide a certain amount of charity care or community  
            benefit in order to maintain their tax exempt status.   
            According to the LAO, of the private hospitals in California,  
            about 30 percent are for-profits and about 70 percent are  
            non-profits. The for-profit hospitals pay corporate income  
            taxes to the state. Non-profit hospitals are exempt from State  
            corporate income taxes, local sales taxes, and property taxes.  
            The tax exemptions are intended to allow non-profit hospitals  
            to use the funds that would have been paid in taxes to provide  
            patient care, invest in their facilities and equipment, and  
            implement other measures that would be beneficial to their  
            delivery of healthcare services. The SOR report indicates that  
            controversy exists in how charity care and community benefits  








          SB 346 (Wieckowski)                                Page 15 of ?
          
          
            are quantified.  Some hospitals use a cost accounting  
            methodology while others use a ratio that converts a  
            hospital's listed charges to the actual cost of the services  
            provided.  SOR also reports that in 2008 the IRS revised Form  
            990 in an effort to provide transparency and accountability  
            and keep pace with changes in the law with regard to the tax  
            exempt sector.  The new form requires non-profit hospitals to  
            report their bad debt expenses and Medicare shortfalls, but  
            separates these from community benefits. 

          4.ACA imposed new federal requirements on non-profit hospitals.  
            With the passage of the Affordable Care Act (ACA), a new  
            provision was added to Section 501 of the Internal Revenue  
            Code specific to hospitals. This new provision (subsection r),  
            imposed new requirements that hospitals must meet in order to  
            maintain their tax exempt status. Among the new requirements  
            (temporary guidelines have been in place since the 2012 tax  
            year, and the final regulations were just adopted in December  
            2014), are a requirement for hospitals to complete a community  
            health needs assessment, and a requirement to establish a  
            financial assistance policy. Generally speaking, the community  
            health needs assessment is similar to California's existing  
            CBL. The community health needs assessment, along with an  
            implementation strategy for meeting the health needs  
            identified in the assessment, must be completed once every  
            three years, and hospitals face a $50,000 federal excise tax  
            for failure to comply with this requirement. 

          5.State Auditor Reports.  In December of 2007, and then again in  
            August of 2012, the Bureau of State Audits (BSA) published  
            reports concerning whether non-profit hospitals were providing  
            a public benefit that justifies their tax-exempt status. In  
            the 2007 report, BSA concluded that when taken as a percentage  
            of net patient revenues, the uncompensated care provided by  
            non-profit and for-profit hospitals were not significantly  
            different, both including and excluding Medi-Cal costs. BSA  
            noted that benefits provided to the community, which only  
            non-profit hospitals are required to report, differentiate  
            non-profit hospitals from for-profit hospitals, but the  
            categories of services and the associated economic value are  
            not consistently reported among non-profit hospitals. BSA  
            stated that although state law requires non-profit hospitals  
            to submit a community benefit plan that describes the  
            activities undertaken to address community needs and assign  
            and report economic values to those benefits, state law does  








          SB 346 (Wieckowski)                                Page 16 of ?
          
          
            not mandate a uniform reporting standard, and as a result,  
            hospitals are reporting their community benefits using  
            different categories and methods for calculating their  
            economic value. In its 2007 recommendations, BSA stated that,  
            "If the Legislature expects plans to contain comparable and  
            consistent data, it should consider enacting statutory  
            requirements that prescribe a mandatory format and methodology  
            for tax-exempt non-profit hospitals to follow when presenting  
            community benefits in their plans." In its 2012 report, BSA  
            reiterated its conclusions regarding the lack of a statutory  
            standard or methodology for hospitals to follow when  
            calculating community benefits.

          6.Charity Care Act of 2012. This initiative would have required  
            certain non-profit hospitals to provide a minimum amount of  
            charity care equal to at least five percent of net patient  
            revenue, impose new data reporting requirements on certain  
            non-profit hospitals, impose new administrative  
            responsibilities on the Attorney General (AG) and give the AG  
            authority to oversee and enforce the provisions of the  
            measure. This measure would have gone into effect January 1,  
            2013, and been repealed on December 31, 2017. The initiative  
            would have exempted non-profit hospitals that are part of an  
            integrated non-profit health system or part of a safety-net  
            non-profit health system as defined by the measure (Dignity  
            Health and Kaiser Permanente) and it did not include  
            multispecialty clinics. According to the LAO, about 36 percent  
            of the State's non-profit hospitals would have been exempted  
            from the requirements of the initiative. On May 2, 2012, the  
            Los Angeles Times reported that the Service Employees  
            International Union dropped the initiative along with another  
            health care initiative as part of an agreement with California  
            Hospital Association.
             
             In its analysis of the Charity Care Act of 2012, the LAO  
            indicated the measure could have resulted in both costs and  
            savings to State and local governments, depending on how the  
            hospitals subject to the measure responded to it. Their  
            analysis finds that most of the non-profit hospitals subject  
            to the measure would have to increase the amount of charity  
            care they provide in order to meet its requirements. To offset  
            the additional costs of providing greater amounts of charity  
            care, hospitals subject to the measure could employ a mix of  
            different strategies.
            








          SB 346 (Wieckowski)                                Page 17 of ?
          
          
          7.Related legislation. AB 1046 (Dababneh), recasts California's  
            hospital community benefits law to more closely align with  
            federal community benefit reporting requirements.  AB 1046 is  
            scheduled to be heard in Assembly Health Committee on April  
            28, 2015.

          8.Prior legislation. AB 503 (Wieckowski), of 2014, was  
            substantially similar to this bill. AB 503 proposed to repeal  
            the existing hospital community benefit law, and establishes a  
            new hospital community law to require private non-profit  
            hospitals to complete a community needs assessment, followed  
            by a community benefits plan. Defined "community benefit" and  
            other terms for purposes of this bill, and requires 90 percent  
            of a private non-profit hospital's community benefit moneys to  
            be allocated to charity care and projects that improve  
            community health for underserved and vulnerable populations,  
            as defined. AB 503 was held on the Senate Appropriations  
            Committee suspense file.

            AB 1952 (Pan), of 2014, would have required non-profit  
            hospitals to annually provide charity care amounting to five  
            percent of the hospital's net patient revenue.  AB 1952 was  
            held on the Assembly Appropriations Committee suspense file.

            SB 1276 (Hernandez), Chapter 758, Statutes of 2014, revised  
            the hospital fair billing program by making individuals who  
            meet the income requirements eligible, even if they have  
            received a discounted rate from the hospital as a result of  
            third-party coverage. Defined "reasonable payment plan," for  
            purposes of both the hospital and emergency physician fair  
            billing policies, as monthly payments that do not exceed 10  
            percent of a patient's family income. 

            AB 975 (Wieckowski), of 2013, would have revised California's  
            non-profit community benefits requirements to include  
            multispecialty clinics, narrowed the activities that  
            constitute community benefits, created a definition of charity  
            care, and required OSHPD to develop a standardized methodology  
            for calculating community benefits and to issue civil  
            penalties for noncompliance with filing requirements.  AB 975  
            failed passage on the Assembly Floor.

            AB 1503 (Lieu), Chapter 445, Statutes of 2010, required  
            emergency physicians who provide emergency medical services in  
            a hospital to provide discounts to uninsured patients,  








          SB 346 (Wieckowski)                                Page 18 of ?
          
          
            established limits on the expected payment for emergency  
            medical services as specified, limited debt-collection  
            activities, and required hospitals to include a written  
            description of the hospital discount policy.

            AB 2942 (Ma), of 2008, would have implemented the State  
            Auditor's 2007 recommendation for a standardized format and  
            methodology to be used when presenting community benefit  
            information, among other requirements. AB 2942 was held on the  
            Senate Appropriations Committee suspense file.
             
            SB 350 (Runner), Chapter 347, Statutes of 2007, required the  
            submission of hospital charity care and discount-payment  
            policies to OSHPD.

            AB 774 (Chan), Chapter 755, Statutes of 2006, established  
            Hospital Fair Pricing Policies, which required every hospital  
            to offer reduced rates to uninsured and underinsured patients  
            who may have low or moderate income, and to provide policies  
            that clearly state the qualifications for free care and  
            discounted payments.

            AB 1045 (Frommer), Chapter 532, Statutes of 2005, revised the  
            Payers' Bill of Rights to require hospitals to provide  
            information about their financial assistance and charity care  
            policies, as well as contact information for a hospital  
            employee or office to obtain additional information.

            SB 610 (Machado), of 2005, would have clarified existing law  
            regarding hospitals entitled to claim the welfare exemption  
            for property tax purposes by indicating a hospital  
            organization is deemed to be organized or operated for-profit  
            if operating revenues exceed operating expenses by more than  
            10 percent. SB 610 was vetoed by the Governor. 

            SB 24 (Ortiz), of 2005, would have established charity care  
            and reduced payment policies and requirements as a condition  
            for hospitals to maintain their tax-exempt status. SB 24 was  
            held on the Senate Appropriations Committee suspense file.

            SB 379 (Ortiz), of 2004, would have required every hospital to  
            have a charity care policy and to provide that policy to  
            patients and would have required OSHPD to develop a uniform  
            charity care application to be used by all hospitals. SB 610  
            was vetoed by the Governor. 








          SB 346 (Wieckowski)                                Page 19 of ?
          
          

            AB 1627 (Frommer), Chapter 582, Statutes of 2003, established  
            the Payers' Bill of Rights, which generally requires certain  
            hospitals to provide written or electronic copies of their  
            chargemaster, as specified.

            SB 697 (Torres), Chapter 812, Statutes of 1994, required  
            non-profit hospitals to conduct community needs assessments  
            and develop community benefit plans and submit those plans to  
            OSHPD.

          9.Support.  This bill is co-sponsored by the California Nurses  
            Association (CNA), the Greenling Institute, the California  
            Rural Legal Assistance Foundation, and the California National  
            Organization for Women. According to CNA, in 2010 alone,  
            California's cities and counties lost revenue and racked up  
            expenses totaling more than $1 billion as a result of  
            non-profit hospital tax exemptions and direct payments to  
            hospitals in their geographic area for indigent care to  
                                                                                     compensate for the non-profit hospitals' inadequate provision  
            of charity care. CNA states this bill is a first step in  
            holding non-profit hospitals accountable for the tremendous  
            tax benefits they receive through their non-profit status. CHA  
            states that this bill ensure that non-profit hospitals are  
            providing, and accurately reporting, the charity care and  
            community benefits they provide, a benefit far exceeding any  
            additional oversight costs to OSHPD. CNA states that the goal  
            of this bill is to end the questionable characterization of  
            certain expenditures as charity care and community benefits,  
            and will solve the problem of inconsistent accounting  
            practices regarding charity care and create a standard  
            definition. CNA quotes a Time Magazine article from February  
            2013 that stated "the 2,900 non-profit hospitals across the  
            country, which are exempt from income taxes, actually end up  
            averaging higher operating profit margins than the 1,000  
            for-profit hospitals after the for-profits' income tax  
            obligations are deducted. In health care, being non-profit  
            produces more profit." The Greenlining Institute states in  
            support that various reports have separately concluded that  
            the community benefit standard is vague and opaque, and that  
            it is unclear whether these tax-exempt institutions are  
            meeting their federal and state mandates to improve community  
            health. The Greenlining Institute argues that this bill will  
            create important opportunities to address issues of health  
            equity through community benefit spending by requiring that  








          SB 346 (Wieckowski)                                Page 20 of ?
          
          
            hospitals locate a significant portion of their community  
            benefit activities geographically within underserved and  
            vulnerable communities. The California Rural Legal Assistance  
            Fund and the California National Organization for Women both  
            state in support that articles in the New England Journal of  
            Medicine and Time Magazine found that a very small percentage  
            of so-called community benefit spending actually goes to  
            community health improvement programs and charity care once  
            you deduct spending on public program shortfall from what  
            nonprofit hospitals are totaling as community benefit, yet  
            for-profit hospitals face similar shortfalls without the  
            benefit of tax-exempt status. 

          10.Support if amended. (Both Health Access California and the  
            California Pan-Ethnic Health Network submitted these letters  
            prior to the most recent set of amendments, which address some  
            of the issues raised in these letters. It is unknown how these  
            amendments have affected the positions of these  
            organizations.) Health Access California states that it  
            supports this bill if it is further amended to provide greater  
            clarity to the requirements for hospital community benefit  
            plans. Health Access states that it strongly supports the  
            intent of this bill that hospitals be required to spend a high  
            proportion of community benefit moneys on the needs of  
            underserved communities, and to involve the community in the  
            development of community benefit plans. Health Access states  
            that unfortunately, there are a number of drafting problems  
            that need to be resolved before it will be able to fully  
            support this bill. First, Health Access states that the way  
            that community benefit is defined, it could be construed to  
            include community benefits provided to affluent populations.  
            Health Access also has concerns with the definition of charity  
            care, and offers an alternative definition of charity care,  
            which it believes would better align this bill with existing  
            California law. Additionally, Health Access argues that the  
            definition of underserved and vulnerable populations is overly  
            broad and needs further specificity, and that by including a  
            definition of vulnerable population used by the Office of  
            Health Equity worsens the problem by counting all women as a  
            "vulnerable" population, even if the woman is affluent,  
            well-educated and of an ethnicity where women have better  
            health outcomes. With regard to this bill's requirement that  
            90 percent of community benefit moneys be allocated to serve  
            either underserved and vulnerable populations " or that  
            address a specific need identified in the community needs  








          SB 346 (Wieckowski)                                Page 21 of ?
          
          
            assessment" could inadvertently allow a hospital to spend the  
            entire amount on a "specific need" that is not targeted to the  
            underserved or vulnerable. Health Access also points out that  
            while both this bill and existing law require a community  
            needs assessment every three years, this bill requires a  
            community benefit plan be done every two years, while existing  
            law requires the plan to be updated annually. Health Access  
            suggests that for at least the next decade, as the  
            transformation brought about by the ACA continues to play out,  
            hospitals should continue to be required to update their plan  
            every year. Finally, Health Access states that while it does  
            not object to allowing a hospital under common control of a  
            corporation to file a consolidated plan, the current language  
            should be amended to ensure that each hospital covered by the  
            consolidated plan identify the distinct needs of its own  
            community and how the community benefit plan serves those  
            needs.

          The California Pan-Ethnic Health Network (CPEHN) also supports  
            this bill if amended to provide greater clarity on the  
            definition of underserved and vulnerable communities. CPEHN  
            requests that the definition of vulnerable populations applies  
            to those communities who are facing exposure to financial  
            risk, and that in addition to including the use of "linguistic  
            isolation," that limited English proficiency be considered.  
            Finally, CPEHN states that it is concerned that the bill as  
            drafted provides too much flexibility for participants of a  
            community health needs assessment to fund special projects  
            outside of the needs of underserved and vulnerable  
            populations. CPEHN states that it appreciates allowing  
            participants some flexibility to identify specific community  
            needs, but would urge the language be amended to guarantee  
            that projects funded would target underserved and vulnerable  
            populations that are facing financial risk.

          11.Opposition. This bill is opposed by the California Hospital  
            Association (CHA), which states it is concerned about the  
            impact this bill would have on a hospital's ability to  
            determine and support organizations and community efforts to  
            address the needs of vulnerable populations. According to CHA,  
            California's CBL has been in place and working since 1994,  
            serves as a model for the ACA, and that this unnecessary  
            legislation conflicts with provisions of the ACA and will  
            increase costs for the state and for hospitals by creating  
            inconsistent federal and state reporting requirements. Dignity  








          SB 346 (Wieckowski)                                Page 22 of ?
          
          
            Health states in opposition that in 2014, it provided $1.3  
            billion in community benefit, absorbed a Medicare shortfall of  
            $674 million from cost, a Medi-Cal shortfall of $864 million  
            (from cost even after the hospital provider fee), and provided  
            $176 million in charity care. According to Dignity Health, as  
            they are located in various communities throughout the state,  
            they are keenly aware of the diversity of each community and  
            are at the pulse of what makes each one so unique. Dignity  
            states that it is proud of California's leadership in the area  
            of community benefit requirements, but believes this bill  
            takes us backwards by creating inconsistent federal and state  
            reporting requirements, increasing costs for both the state  
            and for hospitals. Kaiser Permanente states in opposition that  
            this bill defines "community benefit" in ways that were  
            relevant before the ACA, but may not be now, and that the  
            traditional view that "community benefit" should be comprised  
            of free health care services to the uninsured is being  
            reconsidered in light of the large number of people who will  
            have health coverage. Kaiser also states that this bill does  
            nothing to increase transparency, and that it disregards  
            current state and federal laws that require hospitals to  
            report detailed planning and charitable spending. Stanford  
            Health Care states in opposition that hospitals work  
            collaboratively with communities and stakeholders to assess  
            local health needs and tailor services and investments to  
            address each community's specific needs. According to  
            Stanford, this bill does nothing to strengthen successful  
            community benefit partnerships, and could lead to program  
            cutbacks throughout California, impacting the diverse and  
            vulnerable populations they serve. In addition to numerous  
            hospitals and hospital systems, this bill is also opposed by  
            WEAVE, which states that it receives funding from its  
            non-profit hospital partners, which provides funding to  
            support their crisis stabilization programs for victims of  
            domestic violence and sexual assault in the community. WEAVE  
            states that without this funding it would be forced to turn  
            away families seeking safe shelter, counseling services, and  
            legal assistance.

           SUPPORT AND OPPOSITION  :
          Support:  California Nurses Association (co-sponsor)
                    Greenlining Institute (co-sponsor)
          California Rural Legal Assistance Foundation (co-sponsor)
                    California National Organization for Women  
                    (co-sponsor)








          SB 346 (Wieckowski)                                Page 23 of ?
          
          
                    California Labor Federation
                    California Professional Firefighters
                    California School Employees Association
                    Campaign for a Healthy California
                    Congress of California Seniors
                    Consumer Attorneys of California
                    Consumer Federation of California
                    Guam Communications Network
                    National Union of Healthcare Workers
                    PolicyLink
                    Western Center on Law and Poverty
                    Six individuals
          
          Oppose:   Adventist Health
                    Alliance of Catholic Health Care
                    Arroyo Grande Community Hospital
                    Barlow Respiratory Hospital
                    Beverly Hospital
                    California Chamber of Commerce
                    California Hospital Association
                    Cedars-Sinai Medical Center
                    Central Valley General Hospital 
                    Coalinga Regional Medical Center
                    Corona Regional Medical Center
                    Dignity Health
                    Dominican Hospital
                    Enloe Medical Center
                    Fairchild Medical Center
                    Family Service of Napa Valley 
                    Feather River Hospital
                    French Hospital Medical Center
                    Health Education Council
                    Healthy Smiles for Kids of Orange County
                    Hemet Valley Medical Center
                    Kaiser Permanente
                    La Clinica de la Raza
                    Loma Linda University Health
                    Los Angeles Area Chamber of Commerce
                    Mad River Community Hospital
                    Madera Community Hospital
                    Maple Counseling Center
                    Menifee Valley Medical Center
                    Mercy General Hospital
                    Methodist Hospital of Sacramento
                    Methodist Hospital of Southern California








          SB 346 (Wieckowski)                                Page 24 of ?
          
          
                    North Bay Healthcare
                    O'Connor Hospital
                    Petaluma Valley Hospital
                    Pomona Valley Hospital Medical Center
                    Providence Health and Services Southern California
                    Queen of the Valley Medical Center
                    Ravenswood Family Health Center
                    Redlands Community Hospital
                    Ridgecrest Regional Hospital
                    Santa Rosa Memorial Health
                    Sharp HealthCare
                    Simi Valley Hospital
                    St. Helena Hospital Napa Valley
                    St. Joseph Hospital in Orange
                    St. Louise Regional Hospital
                    St. Mary Medical Center in Fullerton
                    Stanford Health Care
                    Southern Mono Healthcare District dba Mammoth Hospital
                    Sutter Delta Medical Center
                    Sutter Health
                    Ukiah Valley Medical Center
                    ValleyCare Health System
                    WEAVE, Inc.
                    White Memorial Medical Center
                    Woodland Healthcare

                                      -- END --