Four for California

The California Nurses Association today welcomed the introduction of four California legislative proposals that it said will hold hospitals more accountable in meeting their charity care obligations, reduce hospital workplace violence, and increase healthcare industry transparency upon implementation of the Affordable Care Act. The bills were formally introduced Friday.

1. Charity Care Accountability

AB 975, jointly authored by Assembly member Bob Wieckowski of Fremont and Assembly member Rob Bonta of Oakland, addresses what CNA calls a rampant abuse of charity care obligations by nonprofit hospitals that, according to a CNA report last year, are rewarded with nearly $2 billion in tax exempt benefits beyond what they return to communities.

The bill would:

• Clearly define what constitutes charity care which must be the direct provision of care to the uninsured or underinsured, not promotional activities, marketing, cost containment, or other activities more intended to generate profit.

• Set similar restrictions on the definition of “community benefit” programs.

• Improve reporting requirements for greater public transparency in how hospitals are meeting their charity care obligation, with financial penalties for hospitals that fail to meet reporting requirements.

• Establish a mandatory minimum level of charity care that all private nonprofit hospitals must meet to maintain eligibility for tax-exempt status of 5 percent of the hospital’s net revenue.

According to last year’s CNA report, based on public records, half of California’s nonprofit hospitals provide 2.46 percent or less of their operating expenses on charity care, a figure well below what was once the federal requirement that they spend 5 percent of gross revenues on charity care or risk losing tax exempt status. The ripple effect especially hits California cities and counties which lose more than $1 billion as a result of the tax exemption and what the counties pay directly to hospitals in their geographic area to provide hospital care for the poor.

A Bank of America survey, Time magazine reported this week, found that “the 2,900 nonprofit hospitals across the country, which are exempt from income taxes, actually end up averaging higher operating profit margins than the 1,000 for-profit hospitals after the for-profits’ income-tax obligations are deducted. In health care, being nonprofit produces more profit.”

“Too many nonprofit hospitals have failed to meet the public expectation that they provide a level of charity care consistent with the huge tax breaks they receive,” said CNA Co-president Malinda Markowitz, RN. “This bill assures greater accountability and increased transparency that is sorely needed.”

2. Curbing Workplace Violence

SB 718, authored by Sen. Leland Yee of San Francisco, is intended to stem a growing problem of workplace violence in California hospitals. It would require hospitals to establish workplace violence prevention plans and response policies, developed with their employees, to protect workers and patients, and assure treatment for all injured staff, including follow up care and counseling.

The bill would also require hospitals to investigate and report acts of violence to the Division of Occupational Safety and Health (Cal/OSHA), monitor situations involving the risk of violence, and establish financial penalties for failure to report to Cal/OSHA.

The problem of hospital workplace violence has gained prominence with a number of attacks in recent years and coincides with cuts in mental health services and programs by healthcare providers. The Bureau of Labor Statistics say healthcare and social service workers are five times more likely to be the victim of an assault than all other major industries combined. At least 16 states have already enacted legislation to address workplace violence in healthcare.

3. Public Transparency and Accountability for New California Health Insurers

With the implementation of the federal Affordable Care Act, more healthcare insurance companies and other industry players are seeking to cash in on the lucrative profits of enrolling additional members who are required to buy insurance.

AB 578, authored by Assembly member Roger Dickinson of Sacramento would require the state Department of Managed Health Care to provide public notice and information about new managed care applicants, including those who want to participate in the ACA-required health exchange. The bill would also direct the DMHC to invite written public comment and hold a public hearing prior to approval of an application.

4. Extending Safety Standards

SB 631, authored by Sen. Jim Beall of San Jose also follows on the heels of the ACA directing the legislature to study the impact of the escalating delivery of care in non acute-care hospital settings, a practice which is encouraged by the federal law.

An increasing number of hospitals are diverting patients from hospitals to outpatient clinics as well as to “observation” units, often adjacent to emergency rooms, where they can be held for prolonged stays without being formally admitted to in-patient hospital beds which have tougher regulatory oversight than clinics and observation units.

The Time report noted that outpatient services have now become a major driver of rising healthcare costs, while becoming “wildly profitable.” A McKinsey survey found outpatient emergency-room care averages an operating profit margin of 15 percent and nonemergency outpatient care averages 35 percent, compared to inpatient profit margins of about 2 percent. “Experts estimate that outpatient services are now packed with so much hidden profit that about two-thirds of the $750 billion annual U.S. overspending identified by the McKinsey research on health care comes in payments for outpatient services,” according to Time. 

“The legislature and the public should have a greater understanding of how healthcare providers are utilizing non-hospital settings, and whether they are appropriately placing patients in these settings, or abusing those placements to avoid greater oversight and public protection. This bill will begin an important process for making sure our patients have the protection and care they need everywhere healthcare is delivered,” said Markowitz.

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