BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 503
AUTHOR: Wieckowski and Bonta
AMENDED: June 17, 2014
HEARING DATE: June 25, 2014
CONSULTANT: 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 not-for-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
not limited to, any of the following:
a. Health care services rendered to vulnerable
populations, including charity care and the
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unreimbursed cost of providing services to the
uninsured, underinsured, and those eligible for
Medi-Cal, Medicare, California Childrens 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
plan to include the following elements:
a. Mechanisms to evaluate the plan's
effectiveness, including a method for soliciting the
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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.
2.Requires, by January 1, 2017, each private non-profit facility
to develop, in collaboration with the community benefits
planning committee, a community benefits statement that
describes the facility's commitment to developing, adopting,
and implementing a community benefits program, and a community
health needs assessment that evaluates the health needs and
resources of the community it serves.
3.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
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;
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4.Requires a private non-profit facility, in conducting its
community health needs assessment, to solicit comments from,
and meet with, local government officials, health care
providers, registered nurses, and community groups
representing specified constituencies.
5.Requires a private non-profit facility, in preparing its
community health needs assessment, to use available public
health data, and permits the facility to collaborate with
other facilities and health care institutions in conducting
community health needs assessments and to make use of exiting
studies.
6.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.
7.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.
8.Requires private non-profit facilities, by April 1, 2017, to
develop a community benefits plan that conforms to the
provisions of this bill. 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.
9.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;
b. A list of the services the private non-profit
hospital or non-profit multispecialty clinic 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;
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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 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;
10.Permits a private non-profit facility to also report on bad
debts, Medicare shortfalls, Medi-Cal shortfalls, and
shortfalls from any other public program, but prohibits these
reports from being reported as community benefits and to be
calculated based on hospital costs, not charges.
11.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.
12.Requires a private non-profit facility, beginning after April
1, 2017, to submit to OSHPD a community benefits plan that
conforms to this bill every two years, 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
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of benefits provided, a description of the facility's progress
toward meeting its goals and objectives, and an evaluation of
the plan's effectiveness.
13.Permits a person or entity to file comments on a facility's
community benefits plan with OSHPD.
14.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 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.
15.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: charity care;
the cost of community building activities; the cost of
community health improvement services and community benefit
operations; the cost of school health centers, as defined; the
cost of health professions education provided without charge;
subsidized health services for vulnerable populations,
research; contributions to community groups, and, community
building activities.
16.Permits "community benefits" to include the following,
provided that the provision, funding or financial support of
these benefits is demonstrated to reduce community health
costs: vaccination programs and services for low-income
families, school health centers, chronic illness prevention
programs and services, nursing and caregiver training provided
without assessment of fees or payment of tuition, home-based
health care programs for low-income families, or
community-based mental health and outreach and assessment
programs for low-income families (family with income less than
or equal to 350 percent of the federal poverty level).
17.Excludes from the definition of "community benefits" the
unreimbursed cost of providing services to those enrolled in
Medi-Cal, Medicare, California Childrens Services Program, or
county indigent programs or any goods, services, activities,
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programs, or other resources program or activity for which
there is direct offsetting revenue, as defined.
18.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.
Provides definitions for each of these terms that are
consistent with federal IRS definitions of these terms.
19.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 funding or otherwise financially supporting
health care services or items on an inpatient or outpatient
basis to a financially qualified patient with no expectation
of payment, and health care services or items provided to a
financially qualified patient through other non-profit or
public outpatient clinics, hospitals, or health care
organizations with no expectation of payment.
20.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
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organizations.
21.Requires private non-profit facilities to allocate a minimum
of 90 percent of the available community benefit moneys to
charity care and projects that improve community health for
underserved and vulnerable populations, and to allocate a
minimum of 25 percent of the available community benefit
moneys to community building activities geographically located
within underserved and vulnerable populations. Permits moneys
to be used for projects that simultaneously meet both of these
criteria.
22.Defines "underserved and 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; or,
b. A population including, but not limited to:
individuals with low educational attainment, as
measured by the percentage of the population with less
than a high school diploma; individuals who suffer
from linguistic isolation, as measured by the
percentage of households in which no one who is 14
years of age or older speaks English very well;
individuals who are 10 years of age or younger, or who
are over 65 years of age, and underserved minority
populations as long as the low educational attainment
and linguistic isolation factors are met.
23.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.
24.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:
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a. A district hospital organized and governed
pursuant to the Local Health Care District Law, as
specified;
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.
25.Requires a private non-profit facility that reports community
benefits to the community to report on those community
benefits in a consistent and comparable manner to all other
private non-profit facilities.
26.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.
27.Permits a private non-profit facility, under the common
control of a single corporation or another entity, to file a
consolidated plan 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.
28.Requires OSHPD to develop and adopt regulations to prescribe
a standardized format for community benefits plans required
under this bill, and to develop a standardized methodology for
estimating the economic value of community benefits.
29.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.
30.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.
31.Requires OSHPD to make public, including on their Internet
Web site, a community health needs assessment and community
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benefits plan and any comments received regarding those
assessments and plans.
32.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 of these meetings to
be posted no later than 14 days prior to the meeting date.
33.Requires OSHPD to calculate and make public, for every other
year that a community benefits plan is submitted, the total
value of community benefits provided by each facility.
34.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.
PRIOR VOTES : Not Applicable
COMMENTS :
1.Author's statement. According to the author, in exchange for
providing various community benefits, such as charity care and
improving community health, California's private non-profit
hospitals are eligible for certain tax exemptions due to their
non-profit status. However, charity care and community
benefits are not uniformly defined or measure. This ambiguity
prevents California communities from determining if these
hospitals sufficiently benefit the community, a duty
non-profit hospitals are required to fulfill under state and
federal law.
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
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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
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,
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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
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,
which began with the 2012 tax year, are a requirement for
hospitals to complete a community health needs assessment, and
a requirement to establish a financial assistance policy. 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
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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
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 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
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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.
7.Related legislation. SB 1276 (Hernandez), revises 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.
Defines "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. SB 1276 is pending in the Assembly Health
Committee.
AB 1952 (Pan), requires non-profit hospitals to annually
provide charity care amounting to five percent of the
hospital's net patient revenue. AB 1952 was placed on the
Assembly Appropriations Committee suspense file.
8.Prior legislation. 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,
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
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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.
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
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Association (CNA) and the Greenling Institute. According to
CNA, this bill is an important first step in holding
non-profit hospital accountable for the tremendous tax
benefits they receive through their non-profit status.
According to CNA, private non-profit hospitals in California
reaped $1.8 billion more in government subsidies and benefits
from their tax exempt status than the estimated value of the
community benefit and charity care provided. Without a clear
definition of community benefit and charity care, and a
consistent methodology for determining its value along with
uniform reporting requirements, CNA states that abuse of the
privilege of tax exemption will continue. According to CNA, in
2010, California non-profit hospitals provided a mere 2.46
percent or less of their operating expenses on community
benefit, well below the one time federal standard of five
percent needed to maintain tax exempt status. Furthermore, CNA
states that non-profit hospitals accumulated $4.5 billion in
profits that same year, nearly half of it by two of
California's largest chains: Sutter Health and Kaiser
Permanente. 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 as the ACA continues to roll out, and more people
become insured, it believes that hospitals will be able to,
and should establish themselves, as anchor institutions in
their community by increasing their investments in community
benefit. The Greenlining Institute argues that this bill will
increase accountability through the standardization of many
community benefit definitions and by improving community
representation on the decision making bodies that decide where
and how community dollars flow, ensuring that they meet the
community's health needs.
10.Support with amendments. The Western Center on Law and
Poverty (WCLP) supports the intent of this bill to standardize
charity care and community benefit reporting by non-profit
hospitals, but has concerns with the bill as currently
written. Specifically, WCLP is concerned that the changes this
bill is making to the definition of "charity care" will make
charity care reporting less transparent as it differs from
existing financial reporting requirements. WCLP also is
concerned with language that excludes the unreimbursed cost of
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providing health care services through government programs,
such as Medi-Cal, Medicare, and county indigent programs, from
the definition of community benefit. WCLP states that any loss
a hospital suffers in providing these services should be
considered a community benefit so as to encourage
participation in the Medi-Cal program.
11.Opposition. This bill is opposed by the California Hospital
Association (CHA), which argues that this bill imposes new
burdensome mandates and unnecessary regulations. CHA states
that California's existing CBL, which has been in place and
working since 1994, serves as a model for the ACA, and that
unnecessary and confusing changes in this bill threaten
implementation of the ACA at a time when non-profit hospitals
can least afford it. CHA states that this bill's mandated
charity care spending requirements would potentially eliminate
programs, including cancer and other research, physician and
health professional training, neonatal intensive care, mobile
medical and dental clinics, senior support services, diabetes
screening, children's health care and specialized burn units.
CHA states that the impact would be especially devastating in
communities that collaborate with hospitals to develop
programs tailored to meet local needs. Kaiser Permanente
states in opposition that this bill continues to define
"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. Dignity Health states in opposition that
in 2013, its hospitals provided $690 million in community
benefit, $83 million in charity care, absorbed $503 million in
shortfall from cost from Medi-Cal and other means-tested
programs (even after the hospital provider fee), and absorbed
a $406 million Medicare shortfall. Dignity points out that the
IRS tax form for reporting community benefits recognizes and
counts Medicaid shortfalls, whereas this bill excludes from
the definition of community benefit the unreimbursed cost of
providing services to Medi-Cal enrollees or those in other
public programs. Dignity states that this bill makes disappear
half a billion dollars that Dignity Health dedicates to
serving the Medi-Cal population. In addition to numerous
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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 significant
funding to support their crisis stabilization programs for
victims of domestic violence and sexual assault in the
community. WEAVE states that this bill threatens community
benefit partnerships like theirs and could lead to a reduction
of support to serve some of the most vulnerable families in
our communities.
12.Is the definition of vulnerable and underserved too narrow?
On Page 15, lines 26-28, this bill requires 90 percent of
community benefit moneys to be allocated to charity care and
projects that "improve community health for underserved and
vulnerable populations. This bill defines "underserved and
vulnerable populations" (Page 14, beginning on line 7) as any
of the following:
i. 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; or,
ii. A population including, but not limited
to: individuals with low educational attainment, as
measured by the percentage of the population with
less than a high school diploma; individuals who
suffer from linguistic isolation, as measured by the
percentage of households in which no one who is 14
years of age or older speaks English very well;
individuals who are 10 years of age or younger, or
who are over 65 years of age, and, underserved
minority populations as long as the low educational
attainment and linguistic isolation factors are met.
While this definition does contain the caveat "including, but
not limited to," given that this definition controls where 90
percent of the community benefit is to be allocated, this
definition may prove too narrow, and may exclude other
underserved or vulnerable populations that the community needs
assessment identifies as warranting support.
13.Drafting concerns.
a. Financially qualified not defined. On Page 11, lines
13-40, this bill defines "charity care," and includes
several references to "financially qualified patient."
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However, there is no definition of financially qualified
patient. However, in there is a definition of financially
qualified patient in a related provision of existing law
(Health and Safety Code 127400, pertaining to Hospital
Fair Pricing Policies) that the author may wish to
cross-reference here.
b. Unclear how often OSHPD calculates total value of
community benefits. This bill requires facilities to
submit a community benefits plan every two years (Page
19, lines 27-31), and then goes on to specify that "for
every other year that a community benefits plan is
submitted" OSHPD is required to "annually calculate and
make public the total value of community benefits" (Page
20, lines 32-37). It is unclear how OSHPD can "annually
calculate" something every other year. Additionally, if
OSHPD is to perform this function every other year that a
plan is submitted, and a plan is submitted every two
years, is the intent of this provision to only require
OSHPD to perform this calculation every four years?
c. Definitions are confusing. Beginning on Page 9, line
4, this bill defines "community benefits." After the
initial paragraph of definition, there is a second
paragraph that uses the term "community benefits may
include any of the following, provided that the
provision, funding, or financial support of these
benefits is demonstrated to reduce community health care
costs." Because the initial paragraph of definition did
not include this limiting phrase, and because both
paragraphs include some overlap (school health centers,
for example, are included in both paragraphs), it is
unclear how this limiting phrase applies.
Also, generally speaking, this bill includes many
definitions of terms, and many of these definitions use
the phrase "including, but not limited to," so that
rather than a limiting definition, it is more of a list
of examples. While some of the definitions, such as the
definitions of community benefit and charity care, are
central to the bill, the author and sponsors may wish to
consider whether all of the many definitions in this bill
are necessary, and whether the bill could be simplified
and still achieve the objectives of the author.
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SUPPORT AND OPPOSITION :
Support: California Nurses Association (co-sponsor)
Greenlining Institute (co-sponsor)
Alameda Labor Council
Allen Temple Baptist Church
American Federation of Musicians, Local 6
American Federation of State, County and Municipal
Employees
American Federation of Teachers, Local 2121
BAC, Local 3
Berkeley Federation of Teachers
California Alliance for Retired Americans
California Federation of Teachers
California Immigrant Policy Center
California National Organization for Women
California Professional Firefighters
California Rural Legal Assistance Foundation
California School Employees Association
California School Employees Association, AFL-CIO
Communication Workers of America, Retired Member Club
Local 9423
Communications Workers of America, AFL-CIO, District 9
Consumer Attorneys of California
Consumer Federation of California
Courage Campaign
Democracy for America
Gray Panthers, San Francisco Chapter
IFEPT, Local 21
International Brotherhood of Electrical Workers, Local
332
International Longshore workers and Warehouse Union
Pensioners, San Francisco/Bay Area
Ironworkers Local 377
Jobs with Justice, San Francisco
Korean Community Center of the East Bay
Labor United for Universal Healthcare
Laborers Local 261
Latino Coalition for a Health California
Los Rios College Federation of Teachers
Napa/Solano CLC
National Nurses United
National Union of Healthcare Workers
Nevada Chapter, Health Care for All
Office and Professional Employees International Union
Local 3
Olallieberry Inn Bed and Breakfast, Cambria,
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California
Older Women's League
Potrero Hill Democratic Club
Progressive Caucus of the California Democratic Party
Progressive Democrats of America
Progressive Voices
Public Citizen
Sacramento Central Labor Council
San Francisco Building and Construction Trades
San Francisco Central Labor Council
San Mateo Building and Construction Trades
San Mateo Community College Federation of Teachers,
AFT Local 1493
San Mateo County Central Labor Council
Santa Clara Chapter, Health Care for All
Service Employees International Union 1021
Service Employees International Union 521 Retirees
Sheet Metal Workers' International Association, Local
104
South Bay Labor Council
UA Local 393
UAW Local 5810
UC/AFT
UNITE/HERE, Local 2
United Educators, San Francisco
UPTE/CWA
USW, Local 675
Young Invincibles
Oppose: Adventist Health
Adventist Medical Center - Hanford
Adventist Medical Center - Reedley
Adventist Medical Center - Selma
Alliance of Catholic Health Care
Arroyo Grande Community Hospital
Beverly Hospital
California Chamber of Commerce
California Hospital Association
Catalina Island Medical Center
Central Valley General Hospital
Community Medical Centers
Dignity Health
Dominican Hospital
El Camino Hospital
French Hospital Medical Center
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Henry Mayo Newhall Hospital
Hoag Health in Newport Beach and Hoag Irvine
Kaiser Permanente
Lodi Health
Loma Linda University Medical Center
Long Beach Memorial, Millers Children's and Women's
Hospital Long Beach, and Community Hospital Long
Beach
Los Angeles Area Chamber of Commerce
Mad River Community Hospital
MemorialCare Health System
Methodist Hospital of Southern California
Mission Hospital in Mission Viejo
Mission Hospital Laguna Beach
NorthBay Healthcare
Petaluma Valley Hospital
Pomona Valley Hospital Medical Center
Providence Health and Services, Southern California
Queen of the Valley Medical Center
Redlands Community Hospital
Ridgecrest Regional Hospital
Saddleback Memorial Medical Center
San Gorgonio Memorial Hospital
Santa Rosa Memorial Hospital
Scripps
Sharp HealthCare
Sierra View District Hospital
Simi Valley Hospital
Sole Community Hospital in Amador County
Southern Mono Healthcare District dba Mammoth Hospital
St. Helena Hospital
St. Joseph Health
St. Joseph Hospital in Orange
St. Jude Medical Center in Fullerton
St. Mary Medical Center in Apple Valley
Stanford Hospital and Clinics
Stanford Hospital and Clinics
Sutter Health
Ukiah Valley Medical Center
WEAVE, Inc.
White Memorial Medical Center
-- END --
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