August 26, 1999 | Read Time: 2 minutes
Since 1990, eight states have passed laws that require non-profit hospitals to document how they are serving their communities’ health-care needs, a new report says. And in three of those states, hospitals are now required by law to spend a minimum percentage of their revenue on care for the indigent and other needy people.
Many more states are likely to follow suit as lawmakers seek ways to make the organizations more accountable, says the report by the Coalition for Nonprofit Health Care, which represents non-profit health-care organizations.
Non-profit hospitals and health-care organizations have long enjoyed exemption from federal, state, and local taxes as long as they met a broad set of standards, including that the hospitals be governed by a board of directors composed of individuals drawn from the region, provide care to Medicare and Medicaid patients, and maintain an emergency room open to all patients regardless of their ability to pay.
But laws to make hospitals justify their tax status were developed in the 1980s after states began searching for new sources of revenue. At the same time, non-profit health-care systems were seeking to streamline their operations and to focus more on economics to keep pace with the increasing number of managed-care and for-profit health-care companies.
Their newly commercial image made non-profit health-care systems targets for scrutiny and put added pressure on them to prove that they were worthy of tax exemption. In a few cases, hospitals lost their tax-exempt status after local tax authorities took them to court.
Such changes paved the way for a string of state statutes, starting with one in New York in 1990. Since then, California, Idaho, Indiana, Massachusetts, Pennsylvania, Texas, and Utah have passed so-called community-benefit statutes.
Although the laws differ from state to state, they share similarities. Most of the eight states require that non-profit hospitals or health-care systems assess the health-care needs of the geographic regions where they operate, to come up with specific plans to respond to those needs, and to report to oversight agencies detailed information on the amount and types of service they provide to the public.
Several also require hospitals to formulate or reaffirm their mission statements. In New York, such a process is required every three years. In Pennsylvania, Texas, and Utah, hospitals must also show that they spend a minimum percentage of their revenue on charity care.
The Coalition for Nonprofit Health Care said the statutes have given non-profit health organizations a chance to clarify the various ways, even beyond charity care, that they provide social benefits.
A free copy of the report, “Redefining the Community Benefit Standard: State Law Approaches to Ensuring the Social Accountability of Nonprofit Health Care Organizations,” may be obtained by contacting the Coalition for Nonprofit Health Care at (202) 408-7170; fax (202) 289-1504; e-mail info@cnhc.org; World-Wide Web http://www.cnhc.org.
