TEXT-Fitch: definition of charity care key to tax-exempt Calif. hospitals
Aug 20 - Fitch views the increased scrutiny of the tax-exempt status of California's nonprofit hospitals with concern given the added financial pressure it could present if the tax-exempt status was revoked. The California Senate Select Committee on Charity Care and Nonprofit Hospitals began hearing arguments last week considering whether hospitals provide sufficient charity and community benefit to justify their tax-exempt status. A state audit published in early August showed that there is no defined amount of community benefits required from nonprofit hospitals, and the amounts they provide vary widely. We expect these legislative efforts will likely result in the establishment of quantitative thresholds and measures hospitals must meet to qualify for tax-exempt status. However, this definition of charity care could have a broad impact on the sector, since tax-exempt hospitals benefit from property tax exemption and issuance of tax-exempt debt. A similar situation arose in Illinois this past June, though the outcome was favorable for hospitals, as the definition of charity care was broadened by the state to include the difference between the cost of care and the amounts reimbursed under Medicaid, subsidies paid to physicians who treat low-income patients, and community outreach, research, and education programs. How the legislative process will define charity care in California remains uncertain. We believe the potential denial of not-for-profit status may add to financial pressures in an already challenging operating environment, including weak revenue growth, tighter reimbursement, and increasing costs. According to California's Office of Statewide Health Planning and Development (OSHPD), in 2010, approximately half of the state's hospitals were considered tax exempt. Additional information is available on www.fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings
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DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.