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August 26, 2011 > Legislative committee votes to audit non-profit hospitals

Legislative committee votes to audit non-profit hospitals

Submitted By Andrew LaMar

The Joint Legislative Audit Committee voted on August 24, 2011, to conduct an audit of non-profit hospitals to determine whether they meet public benefits requirements to maintain their tax-exempt status.

Non-profit hospitals have come under increasing scrutiny in recent years, with the Internal Revenue Service, the California Franchise Tax Board and the California Board of Equalization taking a closer look at whether they fulfill their responsibilities and if the tax trade-off is merited. The audit will also examine how the hospitals calculate uncompensated care and the impact of non-profit hospital purchases and consolidations on patients' access to care.

"Communities across California are served by non-profit hospitals and we must make sure they are honoring their commitment to serve the public that comes with their special tax-exempt status," said Senate Majority Leader Ellen M. Corbett (D-San Leandro), who requested the audit. "We must ensure our communities and their patients are getting the care, and the access to care, they deserve."

"I am pleased the JLAC Committee approved the audit request," said Alameda County Supervisor Wilma Chan, who joined Corbett in calling for the report. "Taxpayers should know what benefits they receive when hospitals receive approximately $250M in tax breaks."

The audit will follow up on a 2007 report by the state auditor that determined "the categories of services and the associated economic value are not consistently reported among non-profit hospitals." In 2009, the IRS surveyed 500 hospitals and found that the average community benefit for a non-profit hospital to be relatively small. The IRS has since instituted new tax reporting requirements for non-profit hospitals that took effect in 2010.

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