Fending off an attack on nonprofit hospitals

Last week, the Assembly Appropriations Committee derailed Assembly Bill (AB) 975 by moving it to the Suspense File, recognizing the many negative impacts, including the high unnecessary costs to the state. Those who know and care about health care are relieved, because the special interest attack on nonprofit hospitals was the poster child for how interest groups abuse the legislative process byundergoing a pointless series of amendments just to stay alive.

AB 975 is a problem in search of a solution.  The bill conflicts with one of Governor Jerry Brown’s and the Legislature’s top priorities – implementation of the Affordable Care Act (ACA).  It also threatens local organizations that today provide low and no-cost health services throughout California’s most diverse communities.

Proponents of AB 975 tried to manufacture a crisis, publicly using words like transparency and accountability. Behind closed doors it was hardball politics, but arm-twisting couldn’t overcome the fact that nonprofit hospitals today are providing hundreds of millions of dollars in community benefits such as cancer research, diabetes screening, children’s health care and burn units that have saved firefighters’ lives. Nonprofit hospitals must reinvest every dollar above expenses into the local community.

Current law holds nonprofit hospitals accountable to ensure they operate under the requirements to receive tax-exempt status.  The law also already requires full transparency by nonprofit hospitals.  Community benefit plans, updated every three years to ensure they can address issues in real time, are public and available for inspection. They detail a local needs assessment and develop programs to meet those needs. In fact, the California State Auditor concluded that nonprofit hospitals are complying with all federal and state laws regarding tax-exempt status. AB 975 supporters tried to misrepresent the report, which did not call for any change to current law absent legislative prerogative.

AB 975’s Serial Amendments

Since its introduction, AB 975 has faced bipartisan opposition. Multiple unrelated amendments and legislative ‘committee shopping’ exposed the true motive of the bill. It was initially a charity care mandate, replacing local control with state-prescribed spending.  Then it was amended to revoke nonprofit tax status for hospitals that are financially well-managed.  The most recent revisions affected the ACA. That is why the California Hospital Association, SEIU-UHW, California Chamber of Commerce, community groups, and health care providers from across the state opposed it.

AB 975 turns local control on its head in favor of expensive bureaucratic mandates.  Instead of the current system where communities collaborate with nonprofit hospitals to tailor a realistic community benefit plan, AB 975 says hospitals must address every identified need, regardless of cost and demonstrate that they are achieving measurable results. For example, if a community has a challenge with juvenile obesity, the nonprofit hospital would be responsible for fixing that problem irrespective of any other factor.  Aside from the incredible logistical challenges, the significant cost associated with this effort would by itself be virtually impossible.  This would be the standard for every community need. It is expensive, unrealistic and beyond the scope of what a nonprofit hospital should be required to do.

The Threat to Working Families and Access to Health Care

California’s current law is the model for the ACA’s community benefit and charity care guidelines. AB 975 would have destroyed this bond and compliance would have cost the state millions of dollars without any benefit.  Mistakes like those included in the fourth version of AB 975 severely compromise a nonprofit hospital’s ability to expand services and meet the needs of its community.

At least four million Californians may be able to obtain health care coverage for the first time, meaning significant new demands for health care services. Hospitals are facing the challenge of ensuring there are enough beds, services and health care professionals to meet this demand. The demise of AB 975 means we can continue the real work of implementing the ACA.

— Ed’s Note: Martin Gallegos is Senior Vice President/Chief Legislative Advocate for the California Hospital Association.