BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: SB 346 --------------------------------------------------------------- |AUTHOR: |Wieckowski | |---------------+-----------------------------------------------| |VERSION: |April 9, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |April 22, 2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Vince Marchand | --------------------------------------------------------------- SUBJECT : Health facilities: community benefits SUMMARY : Repeals the existing hospital community benefit law, and establishes a new hospital community law to require private non-profit hospitals to complete a community needs assessment, followed by a community benefits plan. Defines "community benefit" and other terms for purposes of this bill, and requires 90 percent of a private non-profit hospital's community benefit moneys to be allocated to charity care and projects that improve community health for underserved and vulnerable populations, as defined. Existing law: 1.Establishes the hospital community benefit law (existing CBL), which establishes requirements on private non-profit hospitals to complete a community needs assessment and adopt a community benefits plan, to annually submit this community benefit plan to the Office of Statewide Health Planning and Development (OSHPD), along with a report of the economic value of community benefits provided in furtherance of the plan. 2.Defines "community benefit plan," for purposes of the existing CBL, as a written document prepared for annual submission to OSHPD, that includes a description of the activities that the hospital has undertaken in order to address identified community needs within its mission and financial capacity, and the process by which the hospital developed the plan in consultation with the community. 3.Defines "community benefit," for the purposes of the existing CBL, as a hospital's activities that are intended to address community needs and priorities primarily through disease prevention and improvement of health status, including, but SB 346 (Wieckowski) Page 2 of ? not limited to, any of the following: a. Health care services rendered to vulnerable populations, including charity care and the unreimbursed cost of providing services to the uninsured, underinsured, and those eligible for Medi-Cal, Medicare, California Children's Services Program, or county indigent programs; b. The unreimbursed cost of services provided related to community-oriented wellness and health promotion, prevention services such as health screenings and immunizations, adult day care, child care, medical research, medical education, nursing and other professional training, home-delivered meals to the homebound, sponsorship of free food and shelter to the homeless, and outreach clinics in socioeconomically depressed areas; c. Financial or in-kind support of public health programs; d. Donation of funds, property, or other resources that contribute to a community priority; e. Health care cost containment; f. Enhancement of access to health care or related services that contribute to a healthier community; g. Services offered without regard to financial return because they meet a need in the service area of the hospital; and, h. Food, shelter, clothing, education, transportation, and other goods or services that help maintain a person's health. 4.Requires private, non-profit hospitals, under the existing CBL, to complete, either alone or in conjunction with other health care providers, a community needs assessment evaluating the health needs of the community serviced by the hospital, that includes a process for consulting with community groups and local government officials, and to update the community needs assessment at least once every three years. 5.Requires private, non-profit hospitals, under the existing CBL, to annually adopt and update a community benefits plan for providing community benefits either alone, or in conjunction with other health care providers, or through other organizational arrangements. Requires the community benefits SB 346 (Wieckowski) Page 3 of ? plan to include the following elements: a. Mechanisms to evaluate the plan's effectiveness, including a method for soliciting the views of the community served by the hospital; b. Measurable objectives to be achieved within specified timeframes; c. Community benefits categorized into the following categories: medical care services, other benefits for vulnerable populations, other benefits for the broader community, health research and training programs, and nonquantifiable benefits. 6.Requires private, non-profit hospitals, under the existing CBL, to annually submit its community benefit plan, including activities the hospital has undertaken in order to address community needs, to OSHPD, and to the extent practicable, assign and report the economic value of community benefits provided in furtherance of its plan. This bill: 1.Repeals the existing CBL law, and establishes a new CBL for private non-profit hospitals and non-profit multispecialty clinics (collectively, non-profit facilities), as these facilities are defined. Makes the repeal of the old CBL law, and the operative date of the new CBL law, effective as of the date of the adoption of regulations by OSHPD prescribing a new standardized format for community benefits plans, 2.Requires, by January 1, 2018, each private non-profit facility to develop, in collaboration with the community benefits planning committee, a community health needs assessment that evaluates the health needs and resources of the community it serves. Requires facilities, prior to completing this assessment, to develop a community benefits statement that describes the facility's commitment to developing, adopting, and implementing a community benefits program. Requires private non-profit facilities to file the community health needs assessment with OSHPD, and to update its community needs assessment at least every three years. 3.Requires, by April 1, 2018, each private non-profit facility to develop, in collaboration with the community, a community benefits plan designed to achieve all of the following outcomes: SB 346 (Wieckowski) Page 4 of ? a. Access to health care for members of underserved and vulnerable populations; b. Addressing of the essential health care needs of the community, with particular attention to the needs of members of underserved and vulnerable populations; c. Creation of measurable improvements in the health of the community, with particular attention to the needs of members of underserved and vulnerable populations. 4.Defines "community" as the service area or patient population for which a non-profit facility provides health care services. Prohibits a non-profit facility from defining its service area to exclude vulnerable populations, including, but not limited to, medically underserved, low-income, or minority populations who are part of its patient populations, live in geographic areas in which its patient populations reside, or otherwise should be included based on the method the hospital facility uses to define its community. 5.Requires non-profit facilities, as part of the definition of "community" above, to create a health equity assessment based on a specified existing law list of 14 key factors relating to health and mental health disparities and inequities upon which the Office of Health Equity is required to base its demographic reports of health and mental health disparities and inequities. 6.Defines "community benefits" as the unreimbursed goods, services, activities, programs, and other resources provided by a non-profit facility that addresses community-identified health needs and concerns, and disparities related to its healthy equity assessment, particularly for people who are uninsured, underserved, or members of a vulnerable population, including, but not limited to, the following: a. Charity care; b. Shortfalls in Medi-Cal, the California Children's Program, or county indigent programs at a cost up to 125 percent of the Medicare rate for the health care services or items provided on an inpatient basis, an outpatient basis, or through other non-profit or public outpatient clinics, hospitals, or healthcare organizations; SB 346 (Wieckowski) Page 5 of ? c. The cost of community building activities, community health improvement services and community benefit operations, school health centers as defined, and health professions education and training provided without charge; d. Amounts given, with no expectation of repayment, to employees for student loan repayment; e. Subsidized health services for vulnerable populations; f. Research; g. Contributions to community groups; h. Vaccination programs and services for low-income families; i. Chronic illness prevention programs and services; j. The 14 key factors relating to health and mental health disparities and inequities upon which the Office of Health Equity is required to base its demographic reports of health and mental health disparities and inequities; and, aa. Home-based health care programs or community-based mental health and outreach and assessment programs for low-income families (families with income less than or equal to 350 percent of the federal poverty level). 7.Excludes the following from the definition of "community benefits:" a. The unreimbursed cost of providing services to those enrolled in Medicare or county indigent programs or any goods, services, activities, programs, or other resources program or activity for which there is direct offsetting revenue; b. Uncollected fees or accounts written off as bad debt; c. Contractual adjustments in the provision of health care services below the amount identified as gross charges or "chargemaster" rates by the health care provider. d. Any amount over 125 percent of the Medicare rate for the health care services or items provided on an inpatient or outpatient basis e. Any amount over 125 percent of the Medicare rate for providing, funding, or otherwise financially supporting health care services or items with no SB 346 (Wieckowski) Page 6 of ? expectation of payment provided to financially qualified patients through other non-profit or public outpatient clinics, hospitals, or health care organizations. 8.Requires a private non-profit facility, beginning after April 1, 2018, to submit to OSHPD a community benefits plan that conforms to this bill every two years, no later than 120 days after the end of the facility's fiscal year. Requires the plan to include, if applicable, a report on the community benefits efforts of the preceding year, including the amounts and types of benefits provided, a description of the facility's progress toward meeting its goals and objectives, and an evaluation of the plan's effectiveness. 9.Defines "community building activities," for purposes of the community benefit definition, as the cost of various kinds of community building activities, including physical improvements and housing, economic development, community support, environmental improvements, community health improvement advocacy, coalition building, workforce development, the 14 key factors relating to health and mental health disparities and inequities upon which the Office of Health Equity is required to base its demographic reports of health and mental health disparities and inequities, and leadership development and training for community members. 10.Defines "charity care," for purposes of the community benefit definition, as the unreimbursed cost to a non-profit facility of providing services to the uninsured or underinsured, as well as providing health care services or items on an inpatient or outpatient basis to a financially qualified patient, as defined, with no expectation of payment. 11.Excludes from the definition of "charity care" any of the following: a. Uncollected fees or accounts written off as bad debt; b. Care provided to patients for which a public program or public or private grant funds pay for any of the charges for the care; c. Contractual adjustments in the provision of health care services below the amount identified as gross charges or "chargemaster" rates by the health SB 346 (Wieckowski) Page 7 of ? care provider; d. Any amount over 125 percent of the Medicare rate for the health care services or items provided on an inpatient or outpatient basis; and, e. Any amount over 125 percent of the Medicare rate for providing, funding, or otherwise financially supporting health care services or items with no expectation of payment provided to financially qualified patients through other non-profit or public outpatient clinics, hospitals, or health care organizations. 12.Requires the community benefits planning committee, as defined, to be composed of the following: a. One of either the governing board of the hospital organization that operates the facility or other party authorized by that governing body, or the governing body of the hospital facility if the facility has its own governing body; b. At least one individual from the local, tribal, or regional governmental public health department, or an equivalent department, with knowledge, information, or expertise relevant to the health needs of that community; c. At least one individual from an underserved and vulnerable population, as defined; 13.Defines "direct offsetting revenue" as the revenue from goods, services, activities, programs, or other resources, which offsets the total community benefit expense of the goods, services, activities, programs, or other resources, and excludes from this definition payments for Medi-Cal, the California Children's Services Program, or county indigent programs. 14.Defines "non-profit multispecialty clinic" as a clinic, defined in existing law, that is operated by a non-profit corporation exempt from federal income taxation, as specified, that conducts medical research and health education and provides health care to its patients through a group of 40 or more physicians, who are independent contracts representing not less than 10 board-certified specialties, and not less than two-thirds of whom practice on a full-time basis at the clinic. SB 346 (Wieckowski) Page 8 of ? 15.Defines "private non-profit hospital" as a private non-profit acute care hospital that has been determined to be exempt from taxation under the Internal Revenue Code, and exempts the following from this definition: a. A district hospital organized and governed pursuant to the Local Health Care District Law, as specified, or a non-profit corporation that is affiliated with the health care district hospital owner by means of the district's status as the nonprofit corporation's sole corporate member; b. A rural general acute care hospital, as defined; c. A children's hospital, as defined; and, d. A multispecialty clinic operated by a for-profit hospital, regardless of its net revenue. 16.Defines "underserved population" or "vulnerable population" as any of the following: a. A population that is exposed to medical or financial risk by virtue of being uninsured or underinsured, as defined, or eligible for Medi-Cal or county indigent programs; b. A population including, but not limited to: a vulnerable community, as defined in a provision of existing law establishing the Office of Health Equity that includes women, racial or ethnic groups, incarcerated individuals, children, and lesbian, gay, bisexual, transgender, queer, and questioning communities, among others; individuals with low educational attainment, as measured by the percentage of the population with less than a high school diploma; and individuals who suffer from linguistic isolation, as measured by the percentage of households in which no one who is 14 years of age or older speaks English with greater than elementary proficiency; c. A population that meets the definition of disadvantaged community pursuant to a provision of law that requires the California Environmental Protection Agency to identify communities based on certain criteria, including areas disproportionately affected by environmental pollution and other hazards; or d. Other populations that are specifically SB 346 (Wieckowski) Page 9 of ? identified in the community health needs assessment required under this bill. 17.Requires a private non-profit facility, in conducting its community health needs assessment, to solicit comments from, and meet with, local government officials, as well as representatives of vulnerable populations, including diverse racial, ethnic, cultural, and LGBTQQ communities, women's health advocates, mental health advocates, health and mental health providers, community-based organizations and advocates, academic institutions, low-income and vulnerable consumers, health care providers, registered nurses, and community groups representing specified constituencies such as patients, labor, and seniors. Permits a facility to create a community benefits advisory committee for the purpose of soliciting community input. 18.Requires a private non-profit facility, in preparing its community health needs assessment, to use available public health data, and permits the facility to collaborate with other facilities and health care institutions in conducting community health needs assessments and to make use of exiting studies. 19.Requires private non-profit facilities, not later than 30 days prior to completing a community health needs assessment, to make a copy of the assessment available to the public for review and comment. 20.Requires private non-profit facilities to provide community benefits to the community as follows: a. Requires a minimum of 90 percent of the total economic value of community benefits to be allocated to community benefits that improve community health for underserved and vulnerable populations or that address a specific need identified in the community health needs assessment. Permits, for purposes of this 90 percent allocation, community benefits that improve community health for underserved and vulnerable populations to include activities, such as health professions education and training, which are not provided exclusively to underserved and vulnerable populations, if the activity will improve community health for underserved and vulnerable populations. SB 346 (Wieckowski) Page 10 of ? b. Requires a minimum of 25 percent of the total economic value of community benefits to be allocated to community building activities geographically located within underserved and vulnerable populations. c. Permits community benefits to be allocated for projects that simultaneously meet both of the above criteria. 21.Requires private non-profit facilities, in developing a community benefits plan, to solicit comments from, and meet with, local government officials, including representatives of local public health departments, and to also solicit comments from, and meet with, health care providers, registered nurses, and community groups representing specified constituencies. 22.Requires a community benefits plan to include, at a minimum, all of the following: a. A summary of the needs assessment and a statement of the community health care needs that will be addressed by the plan; b. A list of the services the private non-profit facility intends to provide in the following year to address community health needs identified in the community health needs assessments, categorized under the following: charity care, as defined; other community benefits, as specified; and, community building activities; c. A description of the target community or communities that the plan is intended to benefit; d. An estimate of the economic value of the community benefits at cost that the private non-profit facility intends to provide; e. A summary of the process used to elicit community participation in the community health needs assessment and community benefits plan design, and a description of the process for ongoing participation of community members in plan implementation and oversight; f. A list of individuals, organizations, and government official consulted during the development of the plan; g. A description of the intended impact on health outcomes attributable to the plan, including short- SB 346 (Wieckowski) Page 11 of ? and long-term measurable goals and objectives; h. Mechanisms to evaluate the plan's effectiveness; i. The name and title of the individual responsible for implementing the plan; and, j. The names of individuals on the private non-profit facility's governing board; 23.Permits a private non-profit facility to also report on bad debts and Medicare shortfalls, but prohibits these reports from being reported as community benefits and to be calculated based on hospital costs, not charges. 24.Requires the governing board of a private non-profit facility to adopt the community benefits plan at a meeting that is open to the public. Requires the governing board, no later than 30 days prior to the plan's adoption, to make a draft of the plan available to the public, including on its Internet Web site, as well as a notice of the date, time, and location of the meeting at which the community benefits plan is to be voted on for adoption. 25.Permits a person or entity to file comments on a facility's community benefits plan with OSHPD. 26.Requires a private non-profit facility to make its community health needs assessment and community benefits plan available to the public on its Internet Web site, and requires a copy of the assessment and plan to be given free of charge to any person upon request. 27.Permits a private non-profit facility, under the common control of a single corporation or another entity, to file a consolidated plan if the plan addresses services in all the categories specified in this bill to be provided by each hospital or clinic under common control of the corporation or entity. 28.Requires a private non-profit facility to report community benefits in a consistent and comparable manner to all other private non-profit facilities. 29.Requires OSHPD to develop and adopt regulations to prescribe a standardized format for community benefits plans required under this bill, and requires the director of OSHPD, SB 346 (Wieckowski) Page 12 of ? immediately following the adoption of these regulations, to certify the adoption of the regulations in writing, post the written certification to OSHPD's Internet Web site, and deliver it to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel. 30.Requires OSHPD to develop a standardized methodology for estimating the economic value of community benefits based on the cost to a private non-profit facility. Prohibits the economic value of community benefits to exceed the actual cost to a private non-profit facility, nor more than 125 percent of the Medicare rate for the health care services or items provided on an inpatient basis, an outpatient basis, or through other non-profit or public outpatient clinics, hospitals, or health care organizations. 31.Requires OSHPD, in developing standards of reporting on community benefits, to conform, to the maximum extent possible, to Internal Revenue Service (IRS) reporting standards for those data elements reported to the IRS, but to also include those data elements required under this bill or other state laws, including charity care. 32.Requires a private non-profit facility to annually file with OSHPD its IRS Form 990, or its successor form, and requires OSHPD to post the form on its Internet Web site. 33.Requires OSHPD to make public, including on their Internet Web site, a community health needs assessment and community benefits plan and any comments received regarding those assessments and plans. 34.Requires OSHPD to maintain a public calendar of community benefit adoption meetings held by the governing board of each private non-profit facility, and requires notice of these meetings to be posted no later than 14 days prior to the meeting date. 35.Requires OSHPD to calculate and make public, for every year that a community benefits plan is submitted, the total value of community benefits provided by each facility. 36.Provides OSHPD the same ability to assess civil penalties for failure to comply with the reporting provisions of this bill SB 346 (Wieckowski) Page 13 of ? as it already has for a facility's failure to file other required reports. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1.Author's statement. In exchange for their significant tax exemptions, California's private non-profit hospitals are required to provide community benefits and charity care through programs and services aimed at improving community health and promoting wellness such as free nutrition classes, mobile health clinics, health screenings, and disease counseling. However, charity care and community benefits are not uniformly defined or measured. This ambiguity prevents California communities from determining if these hospitals are adequately serving their communities, a duty non-profit hospitals are required to fulfill under state and federal law. The Legislative Analyst's Office found that there is currently no uniform definition or standard for "charity care" in state or federal statute. This lack of a clear benchmark has yielded inconsistent methodologies and incomplete reporting. Consequently, we cannot accurately measure nonprofit hospitals' required financial investments in our communities. We give these hospitals favorable tax treatment, so it makes sense that we come together to establish an appropriate and transparent way to calculate the amount of community benefits we are getting in return. This bill makes no changes to how many community benefits a hospital provides, but it will increase accountability and provide a clearer picture of the level of community benefits invested back into our communities. 2.Background on non-profit hospitals and community benefit requirements. Non-profit hospitals have traditionally been exempt from federal income taxes based on the IRS' definition of charity, with the IRS stating that, "the promotion of health is considered to be a charitable purpose. A non-profit organization whose purpose and activity are providing hospital care is promoting health and may, therefore, qualify as organized and operated in furtherance of a charitable purpose." For purposes of California taxes, property owned by a non-profit organization that is used exclusively for religious, hospital, charitable, or scientific purposes is exempt from propriety taxes under what is known as the Welfare SB 346 (Wieckowski) Page 14 of ? Exemption. State law also allows non-profit hospitals to be exempt from state income tax. When the Legislature enacted the existing CBL in 1996, the Legislature found and declared that private non-profit hospitals meet certain needs of their communities through the provision of essential health care and other services, and that public recognition of their unique status has led to favorable tax treatment by the government. In exchange, the Legislature declared, non-profit hospitals assume a social obligation to provide community benefits in the public interest. The CBL enacted in 1996 requires non-profit hospitals to annually submit a "community benefits plan" to OSHPD, based on a "community needs assessment" that is required to be updated every three years. This CBL includes a definition of "community benefit," which included charity care and the unreimbursed cost of providing services, but does not specifically exclude anything from the definition of community benefit, nor does it define "charity care" itself. While the law requires the plan to be submitted to OSHPD, it does require OSHPD to review the plans to ensure that hospitals are reporting data consistently, and OSHPD does not attempt to standardize these reports. 3.Senate Office of Research Report. In a report prepared by the Senate Office of Research (SOR) for an August 15, 2012 hearing of the Senate Select Committee on Charity Care and Non-profit Hospitals, about 247 of California's 387 private hospitals may be eligible for certain tax exemptions due to their non-profit status in exchange for providing various community benefits, such as charity care. However, these community benefits are not uniformly defined or measured. This ambiguity makes it challenging to hold hospitals accountable for the special tax benefits they receive and determine if they are providing meaningful community benefits. Furthermore, some studies show many investor-owned hospitals and public hospitals provide charity care and other community benefits similar to or greater than their non-profit counter parts. The SOR points out that the California Legislative Analyst's Office (LAO), in an analysis of the Charity Care Act of 2012, indicates that there is currently no uniform definition of charity care nor a requirement in State or federal law for non-profit hospitals to provide a certain amount of charity care or community benefit in order to maintain their tax exempt status. According to the LAO, of the private hospitals in California, SB 346 (Wieckowski) Page 15 of ? about 30 percent are for-profits and about 70 percent are non-profits. The for-profit hospitals pay corporate income taxes to the state. Non-profit hospitals are exempt from State corporate income taxes, local sales taxes, and property taxes. The tax exemptions are intended to allow non-profit hospitals to use the funds that would have been paid in taxes to provide patient care, invest in their facilities and equipment, and implement other measures that would be beneficial to their delivery of healthcare services. The SOR report indicates that controversy exists in how charity care and community benefits are quantified. Some hospitals use a cost accounting methodology while others use a ratio that converts a hospital's listed charges to the actual cost of the services provided. SOR also reports that in 2008 the IRS revised Form 990 in an effort to provide transparency and accountability and keep pace with changes in the law with regard to the tax exempt sector. The new form requires non-profit hospitals to report their bad debt expenses and Medicare shortfalls, but separates these from community benefits. 4.ACA imposed new federal requirements on non-profit hospitals. With the passage of the Affordable Care Act (ACA), a new provision was added to Section 501 of the Internal Revenue Code specific to hospitals. This new provision (subsection r), imposed new requirements that hospitals must meet in order to maintain their tax exempt status. Among the new requirements (temporary guidelines have been in place since the 2012 tax year, and the final regulations were just adopted in December 2014), are a requirement for hospitals to complete a community health needs assessment, and a requirement to establish a financial assistance policy. Generally speaking, the community health needs assessment is similar to California's existing CBL. The community health needs assessment, along with an implementation strategy for meeting the health needs identified in the assessment, must be completed once every three years, and hospitals face a $50,000 federal excise tax for failure to comply with this requirement. 5.State Auditor Reports. In December of 2007, and then again in August of 2012, the Bureau of State Audits (BSA) published reports concerning whether non-profit hospitals were providing a public benefit that justifies their tax-exempt status. In the 2007 report, BSA concluded that when taken as a percentage of net patient revenues, the uncompensated care provided by non-profit and for-profit hospitals were not significantly SB 346 (Wieckowski) Page 16 of ? different, both including and excluding Medi-Cal costs. BSA noted that benefits provided to the community, which only non-profit hospitals are required to report, differentiate non-profit hospitals from for-profit hospitals, but the categories of services and the associated economic value are not consistently reported among non-profit hospitals. BSA stated that although state law requires non-profit hospitals to submit a community benefit plan that describes the activities undertaken to address community needs and assign and report economic values to those benefits, state law does not mandate a uniform reporting standard, and as a result, hospitals are reporting their community benefits using different categories and methods for calculating their economic value. In its 2007 recommendations, BSA stated that, "If the Legislature expects plans to contain comparable and consistent data, it should consider enacting statutory requirements that prescribe a mandatory format and methodology for tax-exempt non-profit hospitals to follow when presenting community benefits in their plans." In its 2012 report, BSA reiterated its conclusions regarding the lack of a statutory standard or methodology for hospitals to follow when calculating community benefits. 6.Charity Care Act of 2012. This initiative would have required certain non-profit hospitals to provide a minimum amount of charity care equal to at least five percent of net patient revenue, impose new data reporting requirements on certain non-profit hospitals, impose new administrative responsibilities on the Attorney General (AG) and give the AG authority to oversee and enforce the provisions of the measure. This measure would have gone into effect January 1, 2013, and been repealed on December 31, 2017. The initiative would have exempted non-profit hospitals that are part of an integrated non-profit health system or part of a safety-net non-profit health system as defined by the measure (Dignity Health and Kaiser Permanente) and it did not include multispecialty clinics. According to the LAO, about 36 percent of the State's non-profit hospitals would have been exempted from the requirements of the initiative. On May 2, 2012, the Los Angeles Times reported that the Service Employees International Union dropped the initiative along with another health care initiative as part of an agreement with California Hospital Association. In its analysis of the Charity Care Act of 2012, the LAO SB 346 (Wieckowski) Page 17 of ? indicated the measure could have resulted in both costs and savings to State and local governments, depending on how the hospitals subject to the measure responded to it. Their analysis finds that most of the non-profit hospitals subject to the measure would have to increase the amount of charity care they provide in order to meet its requirements. To offset the additional costs of providing greater amounts of charity care, hospitals subject to the measure could employ a mix of different strategies. 7.Related legislation. AB 1046 (Dababneh), recasts California's hospital community benefits law to more closely align with federal community benefit reporting requirements. AB 1046 is scheduled to be heard in Assembly Health Committee on April 28, 2015. 8.Prior legislation. AB 503 (Wieckowski), of 2014, was substantially similar to this bill. AB 503 proposed to repeal the existing hospital community benefit law, and establishes a new hospital community law to require private non-profit hospitals to complete a community needs assessment, followed by a community benefits plan. Defined "community benefit" and other terms for purposes of this bill, and requires 90 percent of a private non-profit hospital's community benefit moneys to be allocated to charity care and projects that improve community health for underserved and vulnerable populations, as defined. AB 503 was held on the Senate Appropriations Committee suspense file. AB 1952 (Pan), of 2014, would have required non-profit hospitals to annually provide charity care amounting to five percent of the hospital's net patient revenue. AB 1952 was held on the Assembly Appropriations Committee suspense file. SB 1276 (Hernandez), Chapter 758, Statutes of 2014, revised the hospital fair billing program by making individuals who meet the income requirements eligible, even if they have received a discounted rate from the hospital as a result of third-party coverage. Defined "reasonable payment plan," for purposes of both the hospital and emergency physician fair billing policies, as monthly payments that do not exceed 10 percent of a patient's family income. AB 975 (Wieckowski), of 2013, would have revised California's non-profit community benefits requirements to include SB 346 (Wieckowski) Page 18 of ? multispecialty clinics, narrowed the activities that constitute community benefits, created a definition of charity care, and required OSHPD to develop a standardized methodology for calculating community benefits and to issue civil penalties for noncompliance with filing requirements. AB 975 failed passage on the Assembly Floor. AB 1503 (Lieu), Chapter 445, Statutes of 2010, required emergency physicians who provide emergency medical services in a hospital to provide discounts to uninsured patients, established limits on the expected payment for emergency medical services as specified, limited debt-collection activities, and required hospitals to include a written description of the hospital discount policy. AB 2942 (Ma), of 2008, would have implemented the State Auditor's 2007 recommendation for a standardized format and methodology to be used when presenting community benefit information, among other requirements. AB 2942 was held on the Senate Appropriations Committee suspense file. SB 350 (Runner), Chapter 347, Statutes of 2007, required the submission of hospital charity care and discount-payment policies to OSHPD. AB 774 (Chan), Chapter 755, Statutes of 2006, established Hospital Fair Pricing Policies, which required every hospital to offer reduced rates to uninsured and underinsured patients who may have low or moderate income, and to provide policies that clearly state the qualifications for free care and discounted payments. AB 1045 (Frommer), Chapter 532, Statutes of 2005, revised the Payers' Bill of Rights to require hospitals to provide information about their financial assistance and charity care policies, as well as contact information for a hospital employee or office to obtain additional information. SB 610 (Machado), of 2005, would have clarified existing law regarding hospitals entitled to claim the welfare exemption for property tax purposes by indicating a hospital organization is deemed to be organized or operated for-profit if operating revenues exceed operating expenses by more than 10 percent. SB 610 was vetoed by the Governor. SB 346 (Wieckowski) Page 19 of ? SB 24 (Ortiz), of 2005, would have established charity care and reduced payment policies and requirements as a condition for hospitals to maintain their tax-exempt status. SB 24 was held on the Senate Appropriations Committee suspense file. SB 379 (Ortiz), of 2004, would have required every hospital to have a charity care policy and to provide that policy to patients and would have required OSHPD to develop a uniform charity care application to be used by all hospitals. SB 610 was vetoed by the Governor. AB 1627 (Frommer), Chapter 582, Statutes of 2003, established the Payers' Bill of Rights, which generally requires certain hospitals to provide written or electronic copies of their chargemaster, as specified. SB 697 (Torres), Chapter 812, Statutes of 1994, required non-profit hospitals to conduct community needs assessments and develop community benefit plans and submit those plans to OSHPD. 9.Support. This bill is co-sponsored by the California Nurses Association (CNA), the Greenling Institute, the California Rural Legal Assistance Foundation, and the California National Organization for Women. According to CNA, in 2010 alone, California's cities and counties lost revenue and racked up expenses totaling more than $1 billion as a result of non-profit hospital tax exemptions and direct payments to hospitals in their geographic area for indigent care to compensate for the non-profit hospitals' inadequate provision of charity care. CNA states this bill is a first step in holding non-profit hospitals accountable for the tremendous tax benefits they receive through their non-profit status. CHA states that this bill ensure that non-profit hospitals are providing, and accurately reporting, the charity care and community benefits they provide, a benefit far exceeding any additional oversight costs to OSHPD. CNA states that the goal of this bill is to end the questionable characterization of certain expenditures as charity care and community benefits, and will solve the problem of inconsistent accounting practices regarding charity care and create a standard definition. CNA quotes a Time Magazine article from February 2013 that stated "the 2,900 non-profit hospitals across the country, which are exempt from income taxes, actually end up averaging higher operating profit margins than the 1,000 SB 346 (Wieckowski) Page 20 of ? for-profit hospitals after the for-profits' income tax obligations are deducted. In health care, being non-profit produces more profit." The Greenlining Institute states in support that various reports have separately concluded that the community benefit standard is vague and opaque, and that it is unclear whether these tax-exempt institutions are meeting their federal and state mandates to improve community health. The Greenlining Institute argues that this bill will create important opportunities to address issues of health equity through community benefit spending by requiring that hospitals locate a significant portion of their community benefit activities geographically within underserved and vulnerable communities. The California Rural Legal Assistance Fund and the California National Organization for Women both state in support that articles in the New England Journal of Medicine and Time Magazine found that a very small percentage of so-called community benefit spending actually goes to community health improvement programs and charity care once you deduct spending on public program shortfall from what nonprofit hospitals are totaling as community benefit, yet for-profit hospitals face similar shortfalls without the benefit of tax-exempt status. 10.Support if amended. Health Access California states that it supports this bill if it is further amended to provide greater clarity to the requirements for hospital community benefit plans. Health Access states that it strongly supports the intent of this bill that hospitals be required to spend a high proportion of community benefit moneys on the needs of underserved communities, and to involve the community in the development of community benefit plans. Health Access states that unfortunately, there are a number of drafting problems that need to be resolved before it will be able to fully support this bill. First, Health Access states that the way that community benefit is defined, it could be construed to include community benefits provided to affluent populations. Health Access also has concerns with the definition of charity care, and offers an alternative definition of charity care, which it believes would better align this bill with existing California law. Additionally, Health Access argues that the definition of underserved and vulnerable populations is overly broad and needs further specificity, and that by including a definition of vulnerable population used by the Office of Health Equity worsens the problem by counting all women as a "vulnerable" population, even if the woman is affluent, SB 346 (Wieckowski) Page 21 of ? well-educated and of an ethnicity where women have better health outcomes. With regard to this bill's requirement that 90 percent of community benefit moneys be allocated to serve either underserved and vulnerable populations " or that address a specific need identified in the community needs assessment" could inadvertently allow a hospital to spend the entire amount on a "specific need" that is not targeted to the underserved or vulnerable. Health Access also points out that while both this bill and existing law require a community needs assessment every three years, this bill requires a community benefit plan be done every two years, while existing law requires the plan to be updated annually. Health Access suggests that for at least the next decade, as the transformation brought about by the ACA continues to play out, hospitals should continue to be required to update their plan every year. Finally, Health Access states that while it does not object to allowing a hospital under common control of a corporation to file a consolidated plan, the current language should be amended to ensure that each hospital covered by the consolidated plan identify the distinct needs of its own community and how the community benefit plan serves those needs. The California Pan-Ethnic Health Network (CPEHN) also supports this bill if amended to provide greater clarity on the definition of underserved and vulnerable communities. CPEHN requests that the definition of vulnerable populations applies to those communities who are facing exposure to financial risk, and that in addition to including the use of "linguistic isolation," that limited English proficiency be considered. Finally, CPEHN states that it is concerned that the bill as drafted provides too much flexibility for participants of a community health needs assessment to fund special projects outside of the needs of underserved and vulnerable populations. CPEHN states that it appreciates allowing participants some flexibility to identify specific community needs, but would urge the language be amended to guarantee that projects funded would target underserved and vulnerable populations that are facing financial risk. 11.Opposition. This bill is opposed by the California Hospital Association (CHA), which states it is concerned about the impact this bill would have on a hospital's ability to determine and support organizations and community efforts to address the needs of vulnerable populations. According to CHA, SB 346 (Wieckowski) Page 22 of ? California's CBL has been in place and working since 1994, serves as a model for the ACA, and that this unnecessary legislation conflicts with provisions of the ACA and will increase costs for the state and for hospitals by creating inconsistent federal and state reporting requirements. Dignity Health states in opposition that in 2014, it provided $1.3 billion in community benefit, absorbed a Medicare shortfall of $674 million from cost, a Medi-Cal shortfall of $864 million (from cost even after the hospital provider fee), and provided $176 million in charity care. According to Dignity Health, as they are located in various communities throughout the state, they are keenly aware of the diversity of each community and are at the pulse of what makes each one so unique. Dignity states that it is proud of California's leadership in the area of community benefit requirements, but believes this bill takes us backwards by creating inconsistent federal and state reporting requirements, increasing costs for both the state and for hospitals. Kaiser Permanente states in opposition that this bill defines "community benefit" in ways that were relevant before the ACA, but may not be now, and that the traditional view that "community benefit" should be comprised of free health care services to the uninsured is being reconsidered in light of the large number of people who will have health coverage. Kaiser also states that this bill does nothing to increase transparency, and that it disregards current state and federal laws that require hospitals to report detailed planning and charitable spending. Stanford Health Care states in opposition that hospitals work collaboratively with communities and stakeholders to assess local health needs and tailor services and investments to address each community's specific needs. According to Stanford, this bill does nothing to strengthen successful community benefit partnerships, and could lead to program cutbacks throughout California, impacting the diverse and vulnerable populations they serve. In addition to numerous hospitals and hospital systems, this bill is also opposed by WEAVE, which states that it receives funding from its non-profit hospital partners, which provides funding to support their crisis stabilization programs for victims of domestic violence and sexual assault in the community. WEAVE states that without this funding it would be forced to turn away families seeking safe shelter, counseling services, and legal assistance. 12.Policy comments and drafting concerns SB 346 (Wieckowski) Page 23 of ? a. Health equity assessment. Within the definition of the term "community," recent amendments require nonprofit facilities to "create a health equity assessment" based on certain factors that are specified in a provision of existing law that established the Office of Health Equity. As drafted, this appears to be an entirely new assessment, in addition to the requirement to conduct a health needs assessment. The author has indicated this was not the intent of this amendment, and is willing to either revise or remove this language. b. Definition of "community benefits" is confusing. As drafted, the definition of community benefits states that it includes, but is not limited to, a long list of various services and costs. Some of these costs are limited to those provided to low-income families, but because of the way this sentence is structured, it is unclear to which costs and services this limitation applies. This sentence should probably be re-drafted to be in the form of a numbered list, so that what is included as a community benefit is more clearly articulated. c. Implementation date depends on OSHPD. While this bill requires non-profit facilities to conduct a community needs assessment by January 1, 2018, other provisions of this bill state that the new CBL does not go into effect until OSHPD adopts regulations establishing a standardized format for community benefit plans. As there is no date certain for OSHPD to adopt these new regulations, the author may wish to either delay the requirement for the new community needs assessment until the January following the adoption of the regulations, or place a date certain on OSHPD to complete these regulations in advance of January 1, 2018. SUPPORT AND OPPOSITION : Support: California Nurses Association (co-sponsor) Greenlining Institute (co-sponsor) California Rural Legal Assistance Foundation (co-sponsor) California National Organization for Women (co-sponsor) California Labor Federation California Professional Firefighters California School Employees Association Consumer Attorneys of California SB 346 (Wieckowski) Page 24 of ? Consumer Federation of California National Union of Healthcare Workers PolicyLink Western Center on Law and Poverty Six individuals Oppose: Adventist Health Alliance of Catholic Health Care Arroyo Grande Community Hospital Barlow Respiratory Hospital Beverly Hospital California Chamber of Commerce California Hospital Association Cedars-Sinai Medical Center Central Valley General Hospital Coalinga Regional Medical Center Corona Regional Medical Center Dignity Health Dominican Hospital Fairchild Medical Center Feather River Hospital French Hospital Medical Center Health Education Council Healthy Smiles for Kids of Orange County Hemet Valley Medical Center Kaiser Permanente Loma Linda University Health Los Angeles Area Chamber of Commerce Madera Community Hospital Maple Counseling Center Menifee Valley Medical Center Mercy General Hospital Methodist Hospital of Sacramento Methodist Hospital of Southern California North Bay Healthcare O'Connor Hospital Pomona Valley Hospital Medical Center Providence Health and Services Southern California Queen of the Valley Medical Center Ravenswood Family Health Center Redlands Community Hospital Ridgecrest Regional Hospital Sharp HealthCare Simi Valley Hospital St. Helena Hospital Napa Valley SB 346 (Wieckowski) Page 25 of ? St. Joseph Hospital in Orange St. Louise Regional Hospital St. Mary Medical Center in Fullerton Stanford Health Care Southern Mono Healthcare District dba Mammoth Hospital Sutter Delta Medical Center Sutter Health Ukiah Valley Medical Center ValleyCare Health System WEAVE, Inc. White Memorial Medical Center Woodland Healthcare -- END --