Georgia's nonprofit hospitals defending tax breaks

PDF: Tax breaks Study

Nonprofit hospitals in Georgia narrowly dodged "devastating" state cuts last year, and are trying to deter legislators from even suggesting that tax-exempt hospitals should start paying sales tax in a tight budget year.

In a new report, the Georgia Alliance of Community Hospitals touts the value of nonprofits.

photo Nurses LeeAnn Chandler, left, and Debbie Hall discuss a patient in Hamilton Medical Center.

"Without the added services these hospitals provide, Georgia would have nearly no trauma care [or] intensive care for newborns," alliance President Monty Veazey said.

The report states that for every $1 of state tax exemptions, nonprofit community hospitals provide an average of $4.16 in uncompensated community benefits. Those include charity care, Medicaid losses and bad debt from patients who don't pay their bills.

Georgia nonprofit hospitals provided $1.2 billion in "community benefit" compared to an estimated $320 million in tax exemptions, Veazey said.

Last year the hospital industry worked out a compromise with legislators to avoid a loss of the sales tax exemption for Georgia nonprofit hospitals, which represent three-quarters of the 165 acute-care hospitals in the state, according to the Georgia Hospital Association.

Kevin Bloye of the association said the group worries tax exemptions could become a target for savings this year.

"When you think about hospitals, especially those in rural areas that are literally hanging by a thread, this is the kind of thing that could push them over the edge," he said.

The Georgia Alliance for Community Hospitals is directing the report's results to the Legislature's Special Council on Tax Reform and Fairness for Georgians, a new organization that will make recommendations to the General Assembly before the 2011 session begins next month.

Holly Lang, hospital accountability project director with nonprofit consumer protection group Georgia Watch, was not fully satisfied with the alliance's disclosures. She noted that the reports were funded by the hospital industry for lobbying purposes.

Lang said more openness and clarity in quantifying "community benefit" is key to ensuring nonprofit hospitals truly are earning their tax breaks.

She also noted that the report provided to the public does not provide a breakdown of estimated sales and property tax savings for individual hospitals.

"I'm glad they did this. It just still doesn't answer many questions," she said. "We definitely are not advocating for the revocation of tax exemptions for nonprofit hospitals. However, we do feel there is not enough information out there about the value of the tax exemptions, and we do not feel these reports address that."

A more detailed version that will be provided to legislators includes a breakdown by hospital, said John Parker, attorney for the Georgia Alliance of Community Hospitals.

But officials declined to provide the full report to the Chattanooga Times Free Press, arguing the report is not a public document.

Parker provided a partial version that highlighted Dalton-based Hamilton Medical Center's estimated tax exemption of $4.2 million in 2009, compared with its "uncompensated community benefit," estimated at $26.9 million.

Hutcheson Medical Center in Fort Oglethorpe was not included because it has not renewed its membership in the alliance, Parker said.


Veazey said community hospital leaders want to be sure legislators understand the figures when searching for ways to save money in the upcoming fiscal year, though he does not think hospitals will be targeted for reductions.

Hospitals found themselves eyed for cuts for the 2011 fiscal year. Gov. Sonny Perdue recommended reducing Medicaid payment rates by 10.25 percent, saving $144 million, and ending the sales tax exemption for certain nonprofit hospitals, saving $130 million, according to the governor's office.

The loss of the sales tax exemption would have been "devastating," Veazey said.

Instead, Georgia hospitals accepted a 1.45 percent assessment on net patient revenues -- also called a bed tax -- for most hospitals over the next three years. The money will draw down federal matching Medicaid funds and provide extra reimbursement for hospitals that have a high share of those patients.

"We were basically at the end of the day told, 'Here are four cups, pick your poison,'" Veazey said.

"Rather than going to a tobacco tax, which would have generated much more in terms of dollars, they went with the bed tax."

TAX EXEMPTION VALUE IN 2009* Hamilton Medical Center: $4.2 million* Murray Medical Center: $247,191* Floyd Medical Center: $4.7 million* Athens Regional Medical Center: $8.9 millionSource: Pershing Yoakley and Associates study for Georgia Alliance of Community HospitalsFAST FACTOf the 165 acute-care hospitals in the Georgia Hospital Association, 125 are nonprofit.


All Georgia tax credits and exemptions are in the spotlight this year.

The Georgia Legislature created the Special Council on Tax Reform last year and charged it with examining the tax credits and exemptions, said Sarah Beth Gehl, with the Georgia Budget and Policy Institute.

The state has hundreds of tax exemptions on the books, some decades old, that haven't been evaluated recently for effectiveness, she said.

"Often we put these credits and exemptions in place and we never look at them again," she said. "We need to go back and evaluate and examine these and make sure we're getting the return on investment. ... That doesn't mean we're going to cut all of them, but it means we're going to really hold them accountable."

Perdue spokesman Bert Brantley said the attention to exemptions represents a new level of budgetary scrutiny. The governor, whose second term expires this month, is a member of the tax council.

"Because of the recession, I think there's a new focus on that," Brantley said.

"This is the first time I know of you've taken the whole of them [tax exemptions] and said, 'We've carved out these holes in our tax base. Does that make sense from a tax policy perspective? Would it be better to tax everybody the same at a lower rate?'"

Contact staff writer Emily Bregel at or 423-757-6467.