Ill-defined ‘charity care’ mandate puts hospitals at risk

Huge changes, and a considerable amount of uncertainty, are facing the health care industry as California works to implement the federal Affordable Care Act (ACA).   Hospitals must ensure there are enough beds and services, and  health care professionals, to meet the needs of millions of Californians who, for the first time, will be able to acquire health insurance coverage.   The increased demand is real and growing, even as hospitals are incurring  deep cuts in Medi-Cal and Medicare payments.

Now is not the time to add to the risks facing not-for-profit hospitals, but that  would be the result of Assembly Bill (AB) 975. The bill, by Assembly members Bob Wieckowski and Rob Bonta, would impose an unrealistic 8 percent  narrowly-defined mandate of “charity care” spending and replace local decision-making by governing boards with new Sacramento regulations regarding the community benefits  not-for-profit hospitals should deliver. The bill   circumvents community collaboration by prescribing a one-size-fits-all mandate on local community hospitals. What community benefits should hospitals in San Diego, Fresno, San Francisco or Crescent City provide?  Sacramento would decide under AB 975.

This proposed  new set of burdensome regulations  will undermine implementation of the ACA and penalize community hospitals during the transitional years ahead.  AB 975 is the wrong solution  for patients,  health care providers, caregivers, and  the public.

AB 975’s new mandates would be  devastating to rural and urban hospitals that use locally developed community benefit plans to meet the needs of their communities under a California law that was enacted in 1994.   These community-based plans are created by   hospitals, community organizations, consumer groups, and others to ensure that underserved populations have access to quality health care,  emergency medical treatment and outpatient care.  Many California community  hospitals  already are facing financial difficulty as a result of a weak economy, unfunded mandates, and a serious shortfall  between the cost of services rendered and government payments for those services. According to official reports of the California Office of Statewide Health Planning and Development, California’s hospitals  provide $13 billion  in unreimbursed health care services annually. Mandating hundreds of millions more in uncompensated care   will have adverse  consequences, such as  deep cuts to  vitally-important health care services like trauma centers,  emergency services, cancer research, neonatal care, and burn units.

Governor Jerry Brown, in his State of the State address, explained his own opposition to heavy-handed regulation by the state, using the term “subsidiarity”.

“Subsidiarity,” Brown said, “is the idea that a central authority should only perform those tasks which cannot be performed at a more immediate or local level.”   Health care reform, the governor noted, is “incredibly complex.”

The California Hospital Association agrees.  There is no need for Sacramento to force another set of complex regulations and restrictions on not-for-profit hospitals.  As the ratings agency Standard and Poor’s put it recently, “Uncertainties abound, including the number of currently uninsured individuals who will become insured.”   Another ratings agency, Moody’s, noted, “Federal  health care reform…includes cuts in hospital reimbursements in addition to many regulations that have yet to be clarified.”

Not-for-profit hospitals provide  tremendous community benefits, offering critical services to all patients, regardless of their ability to pay for their care.     If patients  need medical care,  California’s community hospitals are there to take care of them, 24 hours, 7 days per week.   In addition,  hospitals are an important economic engine and a valuable source of well-paying jobs.

What can be accomplished by imposing unrealistic bureaucratic mandates on not-for-profit community hospitals?  The answer is worse than nothing; mandates called for in AB 975 will force hospitals to close services and deprive patients of needed care.

Elected officials should focus on implementation of the wide-ranging Affordable Care Act and its many unanswered questions, instead of launching an ill-timed and ill-conceived set of new mandates that promises to hurt our communities’ access to quality health care.

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Ed’s Note: C. Duane Dauner is the president/CEO of the California Hospital Association.  As one of the largest health care trade associations in the nation, CHA represents more than 400 hospitals and health systems in California.  CHA has offices in Sacramento and Washington, D.C.