Fatal System Error 

Private nonprofit hospitals, which benefit from huge tax breaks, fail to care for the East Bay's poorest residents — and now one public hospital is on the verge of collapse.

Page 7 of 7

Last year, after that bill failed, the two lawmakers floated AB 503, a milder proposal that would have established clearer charity care and community benefit definitions. The legislation, which also did not pass, would have required that a minimum of 25 percent of community benefit dollars go toward underserved and vulnerable communities.

"Uniformity and accountability would be the first step," Bonta said in an interview. He argued that a better reporting system would allow for side-by-side comparisons and potentially some kind of ranking of hospitals' charitable care and community benefits. "No hospital is going to want to be on the bottom." And Bonta said that if a more transparent system revealed truly "egregious actors," lawmakers could subsequently consider ways to hold hospitals accountable through fines or other penalties.

A concrete methodology for calculating benefits would also create a fairer system for hospitals and would help health officials identify some of the best practices, Wieckowski said.

The reforms could shine a light on the nonprofit hospitals that do a good job, advocates noted. Children's Hospital Oakland, for example, is a major safety-net nonprofit institution in Alameda County that primarily serves government-sponsored patients. In 2013, when Lucile Packard Children's Hospital, part of Stanford Medicine, opened up a clinic in Emeryville, Children's Hospital Oakland grew concerned that the new facility could siphon off its few privately insured patients. Unlike the Oakland hospital, the majority of Packard's patients are privately insured.

And unlike the other hospital executives I interviewed, Lubin, the Children's Oakland CEO, said he would welcome more clarity in community benefit definitions, because he feels confident about his nonprofit's investments in public benefits and charitable care. Plus, he said, "It's going to make others give more."

But even modest reforms seem unlikely, given the strong opposition from nonprofit hospital lobbyists. The California Hospital Association, which represents nonprofit systems, has vigorously opposed efforts to reform community benefit standards, arguing that stricter requirements would do more harm than good by limiting hospitals' abilities to tailor their community benefit efforts to the specific needs of the areas they serve. Jan Emerson-Shea, spokesperson for the association, said in an interview that AB 503, if enacted, would have threatened existing community benefit programs, though she couldn't cite any specific examples.

After she repeatedly dismissed the criticisms of nonprofit hospitals as misleading political attacks spearheaded solely by the nurse's union, I pointed out that many DMC doctors had also told me they were frustrated that other hospitals don't do enough to care for the poor. She responded: "Doctors don't understand hospital finance."

Emerson-Shea further said that it's unfair to blame hospitals for the mix of privately insured and uninsured patients they treat, arguing that regional demographics determine those ratios. She also downplayed the social obligations of nonprofit hospitals, noting that a hospital's status as a tax-exempt entity is not contingent on whether it's serving low-income patients, and instead simply means the institution is investing its profits back into the organization.

All of the efforts to reform community benefits, Emerson-Shea added, have been a "solution in search of a problem."

The problems at Doctors Medical Center aren't going away anytime soon. The board that runs the district hospital recently unveiled a plan to bring the hospital back to life later this year and sustain it for at least five years, but its survival depends on financial support from many different entities. The proposal calls for money from county debt forgiveness, a new parcel tax, Richmond-based oil giant Chevron as part of its community benefits package with the City of Richmond — and new financial support from the region's private nonprofit hospitals.

However, since DMC's board unveiled its proposal in November, none of the private nonprofit hospital systems have pledged to provide any new money.

When I asked spokespeople for Kaiser, Sutter, and John Muir if they planned to offer financial help moving forward, they declined to make any commitments and noted that these conversations are just beginning.

Betty Crater, sister of the late Booker Williams II, said she doesn't care if DMC as an institution survives, but said that West County residents, including those who don't have Kaiser insurance, deserve a fully functioning, well-staffed community hospital — not one that is perpetually hanging on by a thread.

"We are taxpayers in this county, and there are a lot of homeowners that do not have Kaiser," she said. "There are people that have worked all their lives and have put money into the system and can't get adequate care at a nearby hospital."

Dr. Denise Ricker, a DMC kidney specialist, said she was devastated when she heard about the death of Williams II, a longtime patient of hers. "It will happen to more patients," she said, adding that she has reached out to nearly twenty elected officials begging them to find a way to save the hospital. "How many more will it need to happen to before they start listening?" 

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