Tuesday, November 11, 2008

house study committee on non profit hospital

An explanation of where and what I want the

House of Representatives Study Committee to review concerning

 Not for Profit Hospitals and indigent care / charity care.

Chairman John Lunsford

November 11, 2008


The concept of the original piece of Legislation I proposed in 2008 session was based on CON requirements.  Which I felt made sense at the time but I have since changed my mind on that legislation, and requested that a study Committee be formed to look deeper at the big picture. You see originally I felt 5% was the number or percentage that non profits should pay in exchange for their tax free status. However  I don’t believe that today because it’s not that clear.


Is that :

5% of gross revenue?

5% of adjusted gross revenue?

Do we allow the deduction of charges verses contractual obligations?

Do we allow the Medicaid Medicare shortfall to be added?

Is it calculated before or after DSH funding is added?

Should we count the ICTF money if so towards the total sales or against the obligation?

Do we deduct the contributions of local tax digest mileage assessments?

Do we adjust revenue for, or deduct the ad valorem taxes, federal and state income taxes. sales tax or property tax?


And how much are we deferring locally and how much is the community truly getting in return?


But several issues I do feel strongly about and I know them to be true.


Non life threatening healthcare is a privilege not a right !


A large percentage of the time a physician called in to the ED is not reimbursed. Even if the hospital is And those Doctors should get paid for their services that are requested if possible.


That we have a medical crisis and a trauma crisis on our hands that it is not going to improve by its self I know that we have a finite amount of money and an infinite amount of needs as a state. With that in mind we must make the best decisions possible with the funds available to treat the highest percentage of people in need.  This whole issue is coming to a head while we continue to move forward as one of the fastest growing states in the nation. We are growing in population as well as health care needs. Statistically speaking within the next few years we could easily have over 3 million uninsured gracing the doors of hospitals, clinics and doctors’ offices some models show that happening as soon as 2014.


Of the 3 million uninsured up to 1 million could be classified as indigent while 2 million would be working uninsured.


They will be over 21 years of age under 65 years of age not disabled earning too little for insurance earning too much for Medicaid etc, you get the picture. With no ESI or employer sponsored insurance now what percentage of those will pay their bill I cant tell you.


And a large percentage will receive services in the ED of the hospital because they allow the symptoms to progress ignored until it is now a medical emergency.


I as well as many of my colleagues supported tort reform to reduce costs for medical mal practice and insurance, but we need to do more.


Creative accounting practices and expansive definitions of services have  led to a variety of non-ideal practices by hospital management in order to balance the bottom line, while at the same time maintaining  tax-exempt status. 


Hospital Community benefit standards are lax at best. And way under defined


Cost of services can include the light bulbs in the parking lot. But not necessarily the physicians charges if in private practice.


Charity care, indigent care and bad debt ratio definitions are vague as to what can or cannot be counted in them. So when we say under CON or some other rule that you must do a certain percentage of  X care does it mean anything?



I believe that the concept of “community benefit” should be interpreted to require that not for profit hospitals provide population health care. As a percentage of adjusted gross revenue as defined by a community benefit assessment done by the community equal to a percentage of the taxes deferred.


I believe that a physician performing those services should be compensated for them. or the shortage paid into a fund to insure that occurs.


I believe that we should be taking part of the yearly DSH allotment and using it under a 1115 federal Medicaid demonstration waiver to purchase limited insurance for those who fall into the gap so more of the patients have insurance whereby  reducing the percentage of uninsured.


“According to professor  JESSICA BERG, JD CASE WESTERN RESERVE UNIVERSITY  Both the legislative history of tax-exemption, and political theories regarding the role of the government and the appropriate use of tax revenues, support the notion that community benefit must be interpreted on a group, not an individual, level. “  “Thus, the Provision of individual charity care should comprise only a part of a tax- exempt hospital’s community benefit obligation. “


I am studying models such as Texas community benefit standards and Tennessee’s ten care case management which may allow us to cover a larger portion of the uninsured and limit primary or well care in the emergency room, which is the most expensive place to receive service.


The ideas we are working on should result in better, more expansive benefits for communities; a higher percentage of insured patients, an incentive to compensate the physicians doing the work. Resulting in an overall reduction of the uninsured reducing the incentive for cost shifting thereby reducing health insurance costs whereby increasing the percentage of insured and the cycle repeats. Transparency should provide  fewer problematic Incentives for tax-exempt hospitals attempting to meet their community’s true needs.

Thereby reaching the goals of transparency in healthcare, improving the overall health of our population and fairness to the taxpayer and the provider.  With the ultimate goal being reducing healthcare costs, improving access, reducing insurance costs and expanding coverage to those who need it most.


I hope this clears up some confusion being spun around the capitol and other places as to the true direction of this committee with malice for none but hope for all, and proactive planning for the future of our great state.




John Lunsford

State Representative District 110


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