California Nonprofit Hospitals Targeted In Legislation

Two California lawmakers have introduced legislation that would require nonprofit hospitals to justify their tax-exempt status.

The proposed law, AB975, was introduced by Assemblymen Bob Wieckowski (D-Fremont) and Rob Bonta (D-Oakland). While it has drawn resistance from the nonprofit hospital industry, it does have the support of the California Nurses Association and several other consumer groups, according to an article in The San Jose Mercury News.

The measure was created mostly because of criticism that nonprofit hospitals have the same, if not less, charitable care than their for-profit counterparts. A study by The San Jose Mercury News in 2007 revealed that in three of the five prior years, the average for-profit hospital had higher levels of charitable care than the average nonprofit. Charitable care was defined by the report as free or reduced-cost treatment for poor or uninsured patients.

"We're asking for transparency," Wieckowski said. "They're not paying property taxes, and we expect to get something back from that."

AB975 passed the state's Assembly Health Committee by a 12-7 vote last week, and will now move to the Revenue and Taxation Committee for further consideration. If passed, the law would prevent nonprofit hospitals from counting certain things as charity care, such as writing off unpaid bills as bad debt, staff education, and research.

The bill would also presume a hospital is for-profit if its operating revenues exceed its operating expenses by more than 10 percent. The hospital would then be required to pay taxes unless it can convince the county assessor that it deserves its tax-exempt status.

For their part, nonprofit hospital representatives have harshly criticized the proposed legislation. During the Assembly Health Committee meeting discussing the measure last week, Martin Gallegos, senior vice president, chief legislative advocate of the California Hospital Association, said AB975 was a "solution looking for a problem."

"Something like this could wreak havoc throughout the not-for-profit bond world," he said.

Other organizations opposing the legislation include Kaiser Permanente, Scripps Health, Adventist Health, the Alliance of Catholic Health Care and the California Chamber of Commerce.

You can read the full story in The San Jose Mercury News.