Hugh nonprofit system feels pressure to cut costs, merge and get bigger

National Catholic Reporter, June 16, 1995 by Arthur Jones

In 1994, the Daughters of Charity, St. Louis, spent about $250 million on the poor and community benefit programs such as soup kitchens and clinics.

Sr. Patricia Vandenberg of the South Bend, Ind., Holy Cross Health System said that the congregation's mission statement "urges us to co-minister with the Sisters of the Holy Cross to discern and identify those needs to which we can respond." Those needs include $450,000 in 1994 mission outreach fund grants, with $31.6 million in 1994 charity care, measured in terms of charges foregone because of patients' inability to pay.

If Catholic bishops have not yet realized how large an industry nonprofit health care is, Capitol Hill politicians have.

Two years ago, Democratic Reps. Sam Gibbons of Florida, then the Ways and Means chairman, and Charles Rangel of New York, then the chairman of the Ways and Means Subcommittee on Select Revenue Measures, tried to rein in the nonprofits by making them do more charitable work for their tax-exempt dollars.

Hill aides told NCR that sustained lobbying, including that by Catholic Health Association chief lobbyist William Cox, deflected Rangel's attempt to write tighter aid-to-the-poor guidelines (see accompanying story). Rangel and his aides argue that how much free care the nonprofits give to the community is left to loosely worded regulations and, effectively, to each hospital. And that is insufficient governance, Rangel said.

Rangel's argument is supported in general (it does not deal with religious nonprofits per se) by a May 1990 Government Accounting Office study, "Nonprofit Hospitals: Better Standards Needed for Tax Exemption," that states there is a "tendency for those hospitals with the highest operating margins (and therefore the greatest ability to finance charity care) to have the lowest rates of uncompensated care. Large, urban teaching hospitals had a higher share of the uncompensated care than did other nonprofit hospitals."

Analyzing the amount of care given to indigent and charity cases is further confused by Internal Revenue Service rulings, which, according to some law professors and critics, are based on a 1960s assumption that poverty was about to be eliminated.

Yet, congressional aides think the rapidly increasing profitability of nonprofit hospitals in the early 1990s, now leveling off, will force Congress to reconsider what the tax-exempts are doing for, and with, their tax-free money.

Catholic Health Association spokesperson Fred Caesar told NCR, "CHA expects it to be an ongoing issue in this and future Congresses." Shortell agreed: "I believe Congress will take another hard look. And they have a point. Given that some of these nonprofits are not doing much for the community, why are they tax-exempt? They can say, 'Well, we're committed to charity care, but you can't hold us responsible if we don't have people come (because they're in the suburbs).' But what about the decision they made 15 years ago to abandon the inner city?"

As far as government-mandated, politically inspired health care reform goes -- though in fact it has gone nowhere, despite a prodigious effort by the Clinton administration -- the CHA specifically, and Catholic systems generally, support universal access. Said Daughters of Charity's Jerry P. Widman, senior vice president, finance: "We need universal access to care, and we need all four of those words: I need universal; I need access; and I need to care."