Ohio hospitals provided $2.2 billion in community benefit in 2007; hospital association to testify about new fee

COLUMBUS, Ohio — Ohio’s 178 hospitals said they provided a record amount — $2.2 billion — in charity care and other uncompensated benefits to their local communities in 2007, according to the Ohio Hospital Association.

The association today released preliminary results of its third annual community benefit survey a month early. It’s the association’s latest attempt to get legislators to erase a new hospital fee from Ohio’s proposed budget.

But the survey results also put Ohio hospitals back in the cross-hairs of federal officials who for years have questioned using so-called “community benefit” measures to justify hospitals’ tax-exempt status.

The hospital association said today that its members provided $893.5 million in charity care, $835.7 million in Medicaid subsidies and $1.04 billion in community benefit activities in 2007, the latest year for which federal tax reports are available.

On Tuesday, hospital officials are scheduled to testify before the Ohio Senate Finance and Financial Institutions Committee on the proposed two-year state budget, the association said. Under the version of the budget passed by the Ohio House, hospitals would lose $127 million, according to a new association analysis.

That’s because in late January, Gov. Ted Strickland proposed a new hospital corporate franchise fee to attract federal stimulus dollars to the state’s Medicaid coffers and help balance a state budget stressed by economic recession.

But hospitals are stressed by the recession, too, said James Castle, president and CEO of the hospital association.

In early March, the association told Gov. Strickland the new hospital fee would cost hospitals an additional $598 million over two years. Later that month, hospital leaders told state legislators that the new fee likely would cause job and service cuts as the hospitals provided more uncompensated care — and got paid less for it — because of the nation’s economic woes.

“Many hospitals are on the verge of needing life support,” Castle said in a written statement today. “All of Ohio’s hospitals stand firm in their mission to treat anyone who needs care, regardless of their ability to pay. But keeping that commitment grows more difficult each day.”

Mike Stephens, chairman of the association’s trustee board and president of Sycamore Medical Center in suburban Dayton, Ohio, agrees.

“Given the heavy burden hospitals already shoulder to subsidize the Medicaid program and provide services free of charge, it is unfair and unwise to ask them to pay even more,” Stephens said in the association’s statement.

Most of Ohio’s hospitals are non-profit organizations that are not required to pay federal income taxes because of the uncompensated care and other benefits they provide. Though hospitals do pay taxes on employee wages (pdf), they don’t pay taxes on income or property used for charitable purposes, the hospital association said.

Hospitals also don’t pay income taxes on charitable contributions. And as the size of contributions and operating income has grown in recent years, the hospitals have faced increasing pressure from federal and state governments to justify their tax-exempt status.

At the heart of one of the debates on this status is the concept of community benefit, which in most states like Ohio can be defined differently from hospital-to-hospital, though a majority of the hospitals follow guidelines by the Catholic Health Association, said hospital association spokeswoman Tiffany Himmelreich.

In a September report (pdf), the General Accounting Office said Internal Revenue Service rulings since 1969 have given hospitals “broad latitude to determine the services and activities that constitute community benefit.”

Sen. Charles Grassley, senior Republican on the Senate Finance Committee, has led many discussions in the community benefit debate.

“This report makes clear that tax-exempt hospitals are free to define community benefit as they see fit,” the Iowa senator said in an Oct. 14 response to the General Accounting Office’s report. “While the definition is vague, hospitals are left to fill the void. Ten different hospitals will give 10 different answers.

“There’s no question about the need for fair tax policy and the need for charity care,” Grassley went on. “As long as there’s such uncertainty and inconsistency in the definition of community benefit, it’ll be impossible to gauge whether the public is getting a fair return for the billions of tax dollars that tax-exempt hospitals don’t pay.”