• Sen. Chuck Grassley, R-Iowa, interrogates non-profit hospitals on services to poor
  • Grassley takes suggestions to add more IRS accountability to check non-profit status
  • ACTION NEEDED: California ’s AB774 (Chan) – on the Governor’s desk – would require hospitals to have financial assistance policies, prohibit overcharging of uninsured & underinsured patients.

The U.S. Senate Finance Committee turned its focus to familiar issues for health and consumer advocates in California – hospital billing and collections practices, and charity care. Meanwhile, California is poised to join New York in passing landmark legislation this year to, for the first time, provide consumer protections to uninsured and underinsured patients against hospital overcharging.


At a Wednesday hearing, Sen. Chuck Grassley, R-Iowa, examined whether non-profit hospitals needed to prove that they were doing enough to deserve their tax-exempt status, which amounts to billions in tax breaks from federal, state and local governments. The hearing and documents are available at the U.S Senate website, at:

He started with a story about Diance Insco, a low-income woman who was charged $4,639 by a hospital–“far more than if she had insurance. No one told her about financial assistance or charity care at the hospital. The tax-exempt hospital went after her for the debt and ultimately put a lien on her house.” Ultimately, “the hospital did the right thing and tore up the bill,” said Grassley, but asked “whether we are comfortable with a system that works only if you have every lawyer in the yellow pages getting in on the act.”

Thus, among the issues raised were both the practice of hospitals charging the uninsured more than insurers, and the issue of what obligations nonprofit hospitals had to provide “charity care”–care provided without expectation of payment–to low-income patients.

“There seems to be some agreement that nonprofit hospitals should be providing charity care. It is our responsibility to examine these billions of dollars in tax breaks to understand what benefits they’re providing to Americans,’’ Grassley said. “This is about real people and real people’s lives.’’

Charity care has been an issue for Grassley since 2005, when he asked 10 non-profit hospitals – including Sutter – to answer an extensive questionnaire about their charity care practices and collections against uninsured and underinsured.

Grassley released the hospital responses this week and came to this conclusion: “Non-profit doesn’t necessarily mean pro-poor patient. Non-profit hospitals may provide less care to the poor than their for-profit counterparts. They may charge poor, uninsured patients more for the same services than they charge insured patients.’’

Additionally, the survey found that hospitals varied dramatically in their definitions of charity care, how its valued, eligibility and how they measure their benefit to the community.

“The different yardsticks used makes weighing and considering the charity care and community benefit of different non-profit hospitals less like comparing apples to oranges as comparing apples to farm tractors,’’ Grassley said.

Most egregiously, Grassley noted, hospitals compensate their executives with “gold-plated’’ compensation packages including country club memberships. “All of this calls into question whether non-profit hospitals deserve the billions of dollars in tax breaks they receive.’’


Among the panelists at Wednesday’s hearing was Dr. Nancy Kane, Professor of Health Management at the Harvard School of Public Health, who decried the billions that non-profit hospitals receive in both tax breaks and disproportionate share payments without any clear requirements – or way to track – whether they are providing care to the poor.

“We have created a ‘funded non-mandate’ for charity care and many hospitals enjoy the funds without obeying the ‘non-mandate,’ taking the money and not providing much charity care or responding to the needs of the local community — the most vulnerable communities’’ Kane said.

In spite of recent federal and state attention on hospital billing practices, “both state and federal authorities are finding that the existing standard does not prohibit behavior that society is finding pretty unacceptable.’’

Kane advocated for legislation to address the following issues:

  • Tying patient’s eligibility for a discount or charity program to income – and including underinsured patients.
  • Requiring the IRS to certify the “reasonableness’’ of a hospital’s level of charity care.
  • Requiring hospitals to partner with community groups to plan what benefits it would provide to a community.
  • Requiring a standardized community benefit report to be attached to a nonprofit hospitals Form 990 report to the IRS so its actions would be easily available to the public.


Kane and Grassley pointed to recent guidelines reported to be implemented at 95 percent of Catholic Health Association hospitals in the nation, which define “community benefit’’ and what counts as charity care.

Of contention, however, is whether care provided through Medicaid – which hospitals say do not adequately reimburse for medical services — should be considered charity care. Catholic Health Association does not consider Medicaid services as part of charity care, but the American Hospital Association does.

Kevin Lofton, chair-elect of the American Hospital Association, said, “Everyone needs to know the amount of underfunding because that cost is borne somewhere in the system.’’

But Sister Carol Keehan, Catholic Health Association’s CEO, said that underfunded Medicaid payments, and debt defaults should not be considered a “community benefit.’’


Within weeks, Grassley’s office, along with Sen. Max Baucus, D-Mont., would have a draft proposal that considered both Kane’s suggestions, and the various hospital “voluntary” guidelines.

“It’s important that we make real progress in ensuring that these billions of dollars in tax breaks actually are effective in helping those in need,’’ he said.


On a related issue, advocates are still awaiting the outcome of AB774 (Chan), which was sent to Gov. Arnold Schwarzenegger’s desk in the waning hours of the 2006 Legislative session.

AB774(Chan), sponsored by Health Access California, would require all hospitals (not just nonprofits) to adopt a financial assistance policy, and that uninsured or underinsured patients below 350% of poverty (or $58,100 for a family of three) would have to pay more than the Medicare, Medi-Cal or worker’s compensation rate. Income eligible Californians would need to be informed of the hospital’s financial assistance and charity care policies upon admission.

While the bill does not require any provision of free care or charity care, it prevents the widespread practice of hospital overcharging. It also ensures that patients have the necessary information about their consumer rights and financial options, and prevent them from being sent prematurely to collections and court.

This is the fifth year that advocates have fought for remedies to aggressive collection practices by hospitals. The California Hospital Association is now officially neutral.

ACTION ITEM: The Governor has not yet still needs to hear from you. Urge Gov. Arnold Schwarzenegger to sign AB774.

Gov. Arnold Schwarzenegger

State Capitol
Sacramento , CA 95814
FAX: 916-445-4633

For a sample letter or information, please contact policy coordinator Hanh Kim Quach at 916.497.0923 x 206 or

Health Access California promotes quality, affordable health care for all Californians.
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