By Sandy Kleffman | Mercury News | 8/15/2012

SACRAMENTO -- A nurses' union urged state lawmakers Wednesday to set a minimum level of charity care for all nonprofit hospitals in exchange for their lucrative, tax-exempt status.

"We are calling on state officials to pass legislation to rein in the abuses we have seen," said Michael Lighty, public policy director for the California Nurses Association/National Nurses United.

CNA released a study Wednesday concluding that beyond what they delivered in charity care, California's nonprofit hospitals in 2010 received more than $1.8 billion in government subsidies and benefits from their tax exemption.

Lighty spoke during the first hearing of the Senate Select Committee on Charity Care and Nonprofit Hospitals, chaired by state Sen. Ellen Corbett, D-San Leandro.

Questions about the nonprofit status of hospitals have heightened since an investigation by this newspaper last year found that the responsibility of caring for the poor and uninsured falls largely on the East Bay's financially ailing public hospitals, despite the large tax breaks for nonprofit hospitals.

Lighty criticized what he called "a woeful lack of specific requirements on nonprofit hospitals" and noted that top executives at many such institutions have multimillion-dollar salaries.

He urged legislators to require nonprofit hospitals to use at least 8 percent of their combined operating and nonoperating revenue for charity care, generally defined as free or discounted services for low-income, uninsured patients.

The proposal drew immediate criticism from an industry representative who argued that charity care is just part of the community benefits nonprofit institutions provide.

Hospitals point out that they spend millions of dollars on services other than charity care such as health vans, free screenings, no-cost surgeries, support for clinics and programs, classes and research.

"Flexibility allows hospitals to respond to the unique needs of a community," said Anne McLeod, senior vice president of health policy for the California Hospital Association.

Setting a charity care requirement, she said, could harm places that need higher levels of support. Others pointed out that a charity care standard would be a minimum and hospitals could spend more.

A state audit released last week found that though nonprofit hospitals must file annual community benefit plans, no standards exist for what can be included or the methodology for valuing the benefits.

In estimating the value of community benefits, some hospitals include such things as child care, medical research, nurse training, unpaid bills, and shortfalls in Medicare and Medicaid funding, the audit noted.

If lawmakers want to tie tax-exemptions to community benefits, they should consider imposing requirements and a standard for determining the value of community benefits, the audit said.

Betty Yee, a board member of the State Board of Equalization, said she became interested after hearing that charity care at many nonprofit hospitals is similar to that of for-profit institutions.

A 2007 investigation by this newspaper found that in three of the five years reviewed, the average for-profit hospital had higher levels of charity care than the average nonprofit.

Corbett said the committee will continue trying to determine if taxpayers are receiving a fair deal and if standards are needed.

Speakers noted that the national health reform law will reduce the number of uninsured people, but millions nationwide will remain uninsured, so charity care will still be needed.

The California Nurses Association brought several busloads of its members to the hearing.

"The citizens, the taxpayers need to realize what is going on at these hospitals," said Rochelle Pardue-Okimoto, a registered nurse at Alta Bates Summit Medical Center in Berkeley.

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