S&P: Pensions A Burden For Nonprofit Hospitals

Pension liabilities will be continue to be a burden for nonprofit hospitals rating service, Standard and Poor's (S&P), reported Monday.

While there are other factors contributing to the financial problems of the sector, large pension funding demands are the biggest factor according to a report in Reuters. S&P credit analyst Liz Sweeney said in a statement that the promises of these retirement benefits could be a "drag" on nonprofit hospitals for several years despite improvements in the investments used to fund retirement services.

"Low discount rates have hampered the improvement in funding levels despite a rebound in asset values during the past two years," said Sweeney.

Retirement benefits are just one of the many challenges nonprofit hospitals are facing. S&P noted that as pension gaps continue to grow in state and local governments, employers are putting more money into healthcare systems that have redesigned pensions, which could leave less funds for other projects.

"We believe that health systems will continue to implement plan changes to seek the next level of cost savings within the context of organization-wide expense reduction measures," S&P reported.

Changes from the Affordable Care Act, increasing stress on Medicaid and Medicare, and increased healthcare demands in general, are also increasing the financial difficulties for nonprofit hospitals across the country.

You can read the full story in Reuters.

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.

Moody's Downgrades Nonprofit Hospitals

Moody's Investors Services maintained its negative outlook on the nonprofit health sector, announcing Monday that more hospitals received downgrades than upgrades, citing the down economy and federal budget cuts.

The credit rating agency said that the ratio of downgrades to upgrades was 1.33 to 1, according to Reuters. The hospitals that received upgrades were primarily due to strong management, high revenue from state provider taxes, and mergers. Overall, however, Moody's was not optimistic.

"The increased proportion of downgrades is driven by the continued slow economic recovery, increasing pressure on state budgets, and a large and growing federal deficit that may lead to reductions in Medicare and Medicaid which translate into weak volumes and revenue declines," Moody's said in a statement.

In a reversal from previous quarters, the dollar amount of downgraded debt for nonprofit providers exceeded the dollar amount of upgraded debt, $2.78 billion to $2.11 billion. Moody's said this was an showed an increase of downgrades for large health systems.

Finally, the agency said that the United States Supreme Court's decision last month to uphold the Affordable Care Act was a "neutral event" for nonprofit hospitals.

"Reductions and changes in Medicare and Medicaid reimbursements and funding will be negative in the long term due to expected cuts to these programs stipulated under the act," Moody's said.

You can read the full story on Reuters.

Proposed Rule Would Curb Nonprofit Hospital Debt Collection

The United States Treasury Department released a proposed guidance last week that, if enacted, would make changes to the debt collection process by nonprofit hospitals.

The new rules, which are regulation on a provision in the 2010 Affordable Care Act, were released last Friday, according to a blog post on National Public Radio's (NPR) website. The changes would require hospitals to take the following actions before requesting payment from patients:

• Provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
• Give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
• Give the patient an additional 120 days (for 240 days total) to submit a complete application; and,
• If a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

In a statement, Acting Assistant Secretary for Tax Policy Emily McMahon said the proposal was made because their had been many reports of aggressive hospital debt collection activities, including allowing collectors into emergency rooms.

"These practices jeopardize patient care, and our proposed rules will help ensure they don't happen in charitable hospitals," she said. "These rules also require charitable hospitals to establish and publicize financial assistance policies, and give hospitals the flexibility to establish programs that meet the needs of their communities."

The American Hospital Association (AHA), a trade group, has already come out in opposition to the proposed rules. Melinda Hatton, the group's general counsel, say the changes put too much of the blame on hospitals for the actions of third-party debt collectors. She also said that the penalties for being in violation were too severe, with with hospitals standing to lose their tax exemption.

At a hearing on the proposed changes in the U.S. Senate, Accretive Health Vice President Greg Kazarian apologized to patients about these aggressive tactics, but also said that their actions were exaggerated during investigation. A patient of Kazarian's company, Deb Waldin, said during the hearing that she was approached by a debt collector while she was in extreme pain from kidney stones.

You can read the full story on NPR.

Nonprofit Hospitals Accused Of Poor Charitable Care

A recent study by the Congressional Budget Office (CBO) found that many nonprofit hospitals provide only slightly more charitable care than for-profit ones.

A report on North County Public Radio (NCPR) expanded on this study by telling the story of Lori Duff from Columbus, OH. Duff had frequently visited a local nonprofit hospital called Mount Caramel Health for prenatal care while pregnant with her third son. She had assumed that, since she was earning less than 200 percent of the federal poverty level, that the prenatal care would be free. That's why she was shocked when debt collectors demanded $1,800 for her visits to the hospital.

A spokesperson for Mount Caramel, which sued Duff and several other patients for not paying their bills, told NCPR that its mission is to provide as much charitable care as possible, but it must collect payments from those who can afford to pay them.

This is not the first instance that nonprofit hospitals have been accused of stingy health care. Three Illinois hospitals were denied tax-exemption last year after it was deemed they did not provide enough free care. The Affordable Care Act of 2010 attempted to address this type of issue by setting new rules for how nonprofit hospitals report its charity care. These new rules went into effect last year but have not been widely enforced. Here are some of the requirements:

• Nonprofit hospitals are prohibited from charging uninsured low-income payments higher rates than the lowest amounts billed to individuals with insurance.
• They must have a clearly written financial assistance policy describing who is eligible for free or reduced cost care.
• Extraordinary collections actions are not allowed against patients before determining whether the patient qualifies for financial assistance.

You can read the full story on NCPR's website.