Bay Med lease keeps charity care [The News Herald, Panama City, Fla.]

Dec. 31--Editor's note: This is one in a series of articles examining details and potential effects of the proposed Bay Medical Center lease.

PANAMA CITY -- If the lease of Bay Medical Center to LHP Hospital Group and Sacred Heart Health System is approved, charity care is guaranteed to remain the same, for now.

The joint venture partners have agreed to adopt Bay Medical Center's current policy for treatment of patients with the inability to pay, but there is nothing in the lease agreement that requires management to maintain the commitment.

Outgoing board chairman Floyd Skinner, who will pass the gavel to his successor after a decision is made on the lease, said maintaining protection for services to the underprivileged was a moral imperative for hospital trustees during negotiations to lease the hospital. The 40-year lease, which carries the unilateral option for the joint venture to extend the lease to 60 years, would make Bay Medical Center a for-profit institution, but the joint venture has agreed to maintain the community care practices required of not-for-profit hospitals.

"We exist to provide for the needy. ... That's the reason why most of us board members are on the board," Skinner said. "The board of trustees has worked very hard to get in this agreement what we wanted in it."

The hospital's uncompensated care policy states treatment or admission of patients will not be denied or deferred solely due to financial considerations.

"That is absolutely not going to change," Sacred Heart President and CEO Laura Kaiser said last month. "That is exactly who we are. To change that would not happen."

Kaiser pointed to Sacred Heart's history and mission statement, which says, "We commit ourselves to serving all persons with special attention to those who are poor and vulnerable," as evidence of the organization's commitment to charity care.

Lower threshold

The lease document, however, holds the joint venture partners to a lower threshold for community care than it currently performs.

The lease demands the joint venture operate Bay Medical Center in accordance with federal and state standards for tax-exempt hospitals, which includes acceptance of all Medicare and Medicaid patients, acceptance of all emergency patients regardless of ability to pay, and the general promotion of public health, wellness and welfare to the citizens of Bay County and surrounding areas through the provision of "health care at a reasonable cost."

The lease goes on to say the joint venture initially will adopt Bay Medical Center's existing policy for indigent care, but reserves their right to change the policy and procedures so long as they maintain adherence to community benefit standards.

Officials have said that clause is necessary as federal and state guidelines can change over the potentially 60-year term of the lease.

"There is no specific level of charity care listed in the lease agreement, just as there is no specific level currently, because the level of charity care provided changes every year based on community need," Bay Medical Center CEO Steve Johnson said in a written statement. "The number of people who seek charity care will change each year based on the local economy, local unemployment rates, changes in Medicaid and many other factors which cannot be predicted for the 40-year lease period."

Though the IRS monitors the community benefit of nonprofit hospitals, there are few firm benchmarks to which they must adhere.

"There is no specific level of indigent care required for federal tax exemption," IRS spokesman Michael Dobzinski wrote in an email. "Under ... the Affordable Care Act, the IRS is required to review the community benefit activities of (not-for-profit) hospitals every three years."

A study started by the IRS in 2006 and released in 2009 defines the community benefit standards as the legal means for determining whether a nonprofit hospital is exempt from federal income tax. The standard uses facts and circumstances to assess whether a hospital is exempt or taxable. Uncompensated care is the largest reported community benefit expenditure.

"Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns," according to the report.

At the time of the study, the national average of uncompensated care as a percent of total revenues is about 7 percent. In fiscal year 2010-11, Bay Medical Center spent about $31.5 million in uncompensated care, about 14 percent of the hospital's total revenue of $220 million.

Across its local network that includes three hospitals totaling about 543 beds, Sacred Heart Health System spent $52.6 million in uncompensated care in 2010-2011, about 7 percent of its total revenue of $750 million.

"The amount of charity care Sacred Heart has provided for the first six months of the current fiscal year is even higher than last year," Sacred Heart spokesman Mike Burke wrote in an email. "The demands for charity care vary each year because of factors such as the economy, the number of uninsured persons and the cuts in funding to hospitals that take care of Medicaid patients. ... We have a similar mission as Bay Medical and if our proposal is approved, we intend to provide care to all persons in Bay County, regardless of their ability to pay."

Devotion to charity care has partially fueled Bay Medical's desire to become part of a network. The faltering economy has left Bay Medical Center with ballooning expenses in uncompensated care. In the last 10 years the cost of charity care at the hospital has risen almost $20 million to about $31.5 million this year.

The cost of charity care could be more than absorbed by making Bay Medical Center part of a network because of the group's ability to negotiate for higher insurance reimbursement and lower purchasing prices, Skinner said.

LHP and Sacred Heart administrators have made several verbal commitments to assure the community and hospital officials they are also committed to maintaining community care.

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(c)2011 The News Herald (Panama City, Fla.)

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