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California Senate Scrutinizes Tax Exempt Status Of Nonprofit Hospitals

SACRAMENTO (KCBS) – The State Senate has convened a panel to consider whether nonprofit hospitals in California provide enough charity care to deserve the tax-exempt status that grants them huge tax breaks and subsidies.

The Senate Select Committee on Charity Care and Nonprofit Hospitals held its first meeting Wednesday, nearly a week after a state audit revealed there are no set requirements for hospitals to demonstrate how much charity care they provide.

KCBS’ Anna Duckworth Reports:

Betty Yee, a member of the State Board of Equalization, testified that for several years, her agency has been reviewing how consolidation in the health care industry has changed spending priorities at increasingly larger hospital systems.

“The board began looking at this issue in the early 2000s because there were many, many concerns that had been expressed about nonprofit hospitals throughout the state, one of which was the high level of CEO compensation,” Yee said.

There are around 430 hospitals in California, and a majority of them are nonprofit.

Nonprofit hospitals should be required to spend at least eight percent of their revenue on care for low-income and indigent patients and the state should spell out clearly how to document meeting that obligation, said Pam Allen, legal director of the California Nurses Association.

“The task of assessing whether a nonprofit hospital has met its social obligation to provide community benefits in the public interest in exchange for the free ride on taxes is made difficult by the vague language in the statute regarding reporting,” she said.

The union estimates non-profit hospitals in California received more than $1.8 billion in subsidies and benefits because of their tax-exempt status.

(Copyright 2012 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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