Just Not Good Enough

If you can momentarily turn off the noise about the financial crisis gripping this country, perhaps you can hear whispers from hospital senior leaders about community benefit. Not two weeks ago, we heard again from Sen. Charles Grassley that he's not stepping back on his crusade for greater transparency among hospitals and the amount of community benefit they do (or do not) provide their communities in return for the tax benefits they get. As things usually do in the world of politics and business, how you measure that comes down to money.

This past summer, I was part of the audience at a particularly animated discussion on these matters at the Healthcare Financial Management Association's Annual National Institute in Las Vegas.

It was fun to be the fly on the wall in that room, so to speak. One CFO whom I will not name stood up during the Q&A portion of the seminar and declared that the hospital itself is a community benefit—essentially because it's there. "The feds are missing the point," he exclaimed. "Many things the hospital offers simply wouldn't be there otherwise."

You can't make this stuff up. No one called him out on this statement. Not even me, but I was thinking to myself, "sorry bud, but that's not good enough."

By his logic, I thought, we could call a lot of things community benefits that really aren't. Wal-Mart could be considered a community benefit, and thus, should be exempt from taxation as well.

See if you agree with my reasoning here.

Wal-Mart brings low prices on a huge variety of consumer goods to a community—prices that would be much higher if Wal-Mart hadn't located there. If it wasn't for Wal-Mart, all those mom-and-pop stores downtown with high overhead and high prices would still be the only game in town. Therefore, they're providing a community benefit and deserve a tax break. Many companies, in fact, have successfully lobbied for local tax breaks by this twisted logic. But those are granted on an individual basis, and most thinking people carry a healthy dose of skepticism when looking at them. Kind of like those economic impact studies that people lobbying for a variety of preferential tax treatments trot out regularly—one of my pet peeves.

The fact that these tax breaks are given does not mean that the argument for giving them is not as ludicrous as that CFO's argument was at HFMA.

My Wal-Mart analogy is an imperfect one, but it serves to illuminate the differences between some hospitals' holier-than-thou attitude when it comes to taxation and others who want greater transparency from them, such as Sen. Grassley and other members of Congress from both parties. Perhaps a majority of hospitals do provide care that wouldn't be there if they weren't in the community. Free or substantially discounted healthcare is one benefit that in my mind, does deserve a tax break. But I don't understand the resistance to a uniform standard of reporting and accounting that benefit. Currently, we have no way of knowing for sure.

What do you think? What are the holes in my argument? I'd love to hear from you senior healthcare leaders, so write me and tell me your story.