Senator Corbett Calls for Greater Scrutiny of Nonprofit Hospitals After State Audit Released

August 09, 2012

SACRAMENTO – Senate Majority Leader Ellen M. Corbett (D-San Leandro) called for greater scrutiny of nonprofit hospitals today in the wake of a state audit that revealed there is no defined amount of community benefits required for hospitals to deliver in order to get tax-exempt status.
 
Corbett requested the audit last year. The audit was released just a few days prior to a hearing of the Select Committee on Charity Care and Nonprofit Hospitals, which will discuss the issues raised next week. The hearing is scheduled for 10 a.m. Wednesday in the state Capitol Room 3191.

“Communities across California are served by nonprofit hospitals, and we need to make sure they are honoring their commitment to serve the public that comes with their special tax-exempt status,” Corbett said. “This audit makes clear that there are no uniform standards or requirements for nonprofit hospitals, when it comes to charity care.”

Hospitals receive nonprofit status, and the benefit of not paying taxes, due to their commitment to provide charity care. Many nonprofit hospitals make a significant effort to honor that mission, but questions have been raised as to whether others do not.    

Nonprofit hospitals have come under increasing investigation in recent years, with the Internal Revenue Service, the California Franchise Tax Board and the California Board of Equalization taking a closer look at whether they fulfill their responsibilities and if the tax tradeoff is merited.

The audit released today made several key findings, including:
• Neither federal nor state law requires nonprofit hospitals to deliver a specific amount of community benefits to qualify for tax exemptions.
• There is no standard methodology for calculating the costs associated with uncompensated care. The hospitals reviewed each used different methods to calculate and report the cost of uncompensated health care services. 

The entire contents of the audit are available at www.bsa.ca.gov.

Contact: Andrew LaMar, (916) 651-4010