The California Legislature is considering a proposal to establish a minimum amount of charity care that private hospitals must provide to earn not-for-profit status and the tax benefits that go with it.
AB 975Â — by Assembly members Rob Bonta (D-Oakland) and Bob Wieckowski (D-Fremont) — would more tightly define charitable care and stipulate that private not-for-profit hospitals may not have operating revenue exceeding 10% of operating expenses, which includes charity care, community benefits and all other normal business expenses.
State law currently requires not-for-profit hospitals to provide charity care, but because definitions of charity care are not specifically spelled out, minimum requirements are not clearly defined. This bill hopes to remedy that.
Not-for-profit hospitals have come under increasing federal and state scrutiny in recent years. The Internal Revenue Service, the California Franchise Tax Board, the California Board of Equalization and the state Legislature all mounted investigations to take a closer look at whether tax breaks are warranted and not-for-profit hospitals fulfill their responsibilities.
The back story on this issue includes an attempt last year by a labor group to put the issue of hospital charity care before voters in a statewide ballot initiative. In May last year, the Service Employees International Union and the California Hospital Association reached an agreement that enlisted CHA’s help in the union’s organizing efforts in exchange for SEIU dropping proposed ballot initiatives that sought to limit hospital billing and boost charity care.
The proposed Charity Care Act of 2012Â would have required some not-for-profit hospitals to spend at least 5% of patient revenue on health care for low-income patients.
AB 975 would establish a standard definition of charity care under the Affordable Care Act beginning in 2014. The bill deals only with private hospitals, not public or University of California hospitals.
We asked legislators, stakeholders and consumer advocates why AB 975 is or isn’t a good idea.
We received responses from:
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