View from Washington: Hospitals at Center of Non-Profit Reforms

In the last year and, particularly, the last few months, hospitals – especially non-profit providers, which comprise almost two-thirds of the nearly 5,000 hospitals nationwide – have become the targets of several investigative and oversight efforts by various Congressional committees.

Issues that have been raised against non-profit hospitals range from aggressive billing and collection practices used for the poor and uninsured, to excessive executive compensation and questioning whether the nation receives sufficient benefit for hospitals receiving tax-exempt status. Hearings focused on these concerns have been held in the House Ways and Means, and Energy and Commerce committees, in addition to the Senate Finance Committee.

In late-spring, the Senate Finance Committee, and the Oversight & Investigations Subcommittee of the House Energy and Commerce Committee, sent letters to a number of large hospital systems calling on them to account for their charitable activities, given the tax exempt status they receive. The letters were seeking information on up to 21 specific billing practices and ventures with for-profit companies and hospitals.

While battling these daily challenges, non-profit hospitals will likely soon be regulated by new Sarbanes-Oxley-type reforms. Sarbanes-Oxley, the post-Enron law that imposes financial, accounting and governance reforms on publicly traded corporations, has inspired similar reforms for the non-profit world.

On June 22, a panel of leaders charged with reforming the non-profit sector released a list of more than 100 recommendations that non-profit organizations, Congress and the Internal Revenue Service should implement to strengthen the sector’s transparency, governance and accountability. The Senate Finance Committee, which called for the panel, has indicated legislation will be introduced this summer to address the aforementioned non-profit abuses.

Hospitals are not the only non-profits being investigated. However, the facilities have gained the most attention because billions of dollars in federal money flow through these entities. Unfortunately, with the implementation of new regulations comes added costs and time that will be diverted from investments in patient care.

These federal probes are all happening as hospitals continue to struggle with their everyday financial realities. If the $10 billion in Medicaid reductions over five years called for in the current Congressional budget resolution is not reached, Medicare will be the next entitlement program on the chopping block. Since the two federal programs cover more than half the care provided in hospitals, payment reductions to Medicare and Medicaid will directly affect hospitals’ financial performances.

While non-profit hospitals are facing business practice examinations, they also will face a shove from the federal government to implement information technology. Such an investment calls for billions of dollars, which hospitals are without. Moreover, worker shortages will reach crisis proportions in the coming years, unless time and money is invested now in the future workforce. All this as the baby boomers continue to age, placing more demands on the U.S. healthcare system.

These constant pressures make it extremely difficult for hospitals to make critical investments while keeping up with the cost of administering quality care. Some in the policy community believe the United States is in a federal “health policy lull” for hospitals. It seems it could be more accurately described as a “gathering storm.”

Robert Betz Ph.D. About Robert Betz Ph.D.

Robert Betz, Ph.D., is president of Robert Betz Associates, Inc. (RBA), a well-established federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit www.robertbetz.com.

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