SAN LEANDRO HOSPITAL | Alameda County Supervisor Wilma Chan's latest attempt to turn the legislative screws on Sutter Health and its likely attempt to shutter San Leandro Hospital may result in further scrutiny over the health care provider's lucrative non-profit tax exemptions.
At a well-attended forum featuring Board of Equalization member Betty Yee, Chan and others questioned whether Sutter Health and other large health care providers are indeed, providing relevant charitable work that is legally required in return for tax breaks that totalled over $30 million statewide for all hospitals in 2011. In Alameda County, where chains like Sutter and Kaiser Permanente rule the roost, the exemptions equalled $1.2 million.
While the 90-minute public meeting again verged into a rallying cry for the community to continue opposition to the potential closure of San Leandro Hospital, a few notable employees of the hospital spoke out against some of Sutter's practices and raising troubling questions over the trustworthiness of its general accounting. Sutter has long stated San Leandro Hospital is hemorrhaging money and unsustainable.
Eden Township Healthcare District Chair Carole Rogers told the group Sutter's touting of charity work is woefully inflated. Many were angered Friday over a full-page color advertisement placed by Sutter in newspapers, including the San Leandro Times. In an obvious attempt to blunt criticism from Friday's scheduled meeting, the ad boasts of donating $756 million in charity work over the years. Rogers, as a former Sutter employee, said she and others were periodically asked to document volunteer work performed on personal time. Rogers presumes the cards were used to artificially inflate Sutter's charitable requirements for state tax breaks.
Procuring independent reports on Sutter's books is nearly impossible since it is not only a private hospital, but because San Leandro Hospital's license is shared with nearby Eden Medical Center in Castro Valley. Rogers also repeated a notorious story often mentioned by supporters of San Leandro Hospital who scoff at Sutter's accounting of the facility when Eden donated a CT scan to San Leandro Hospital, but later charged it over $1 million for installation. Critics say the accounting arrangement was common and allowed Sutter to positively and falsely enhance the financial situation at Eden, while showing a loss at San Leandro Hospital. On the District's legal front, Rogers said she was limited in what she can say publicly, but added, "San Leandro Hospital is still open and we're in negotiations."
Even though the tax exemptions are reserved for non-profit hospitals, the law allows for them to maintain a 10 percent margin on top of operating expenses, said Yee. In those cases, the surplus must be used for large-scale construction projects or expansion. Yee added there are a myriad number of ways a hospital provider like Sutter can find loopholes around their charitable requirements outside of quantifiable donations to actually charities--some as simple as publishing a small booklet, say, for children.
"These tax breaks come with responsibilities," said Chan, who has long been a thorn in Sutter's side going back to her stint in the State Assembly. Chan said Sutter was asked attend Friday's hearing, but they did not respond to her invitation. Chan suggested legislation or changes in how the Board of Equalization deals with these types of tax exemptions. "When a non-profit closes a hospital, it needs a higher standard," she said.
"They don't get a pass on paying their taxes," said Mike Brannan, a labor representative for the facilities California Nurses Association. "Their decisions are based on profits and not based on what's good for the community."
At the conclusion of the hearing, Yee, who is contemplating a run for state controller in 2014, was so unnerved by the potential for hospitals skirting their end of the tax break bargain, that she will write a letter to Sutter questioning their exemption.
In the meantime, the community continues to hope it can save its hospital. "What are we going to do if that hospital closes?" said Dr. Robert Gingery, a 30-year veteran of the hospital. "This is a health crisis. Some people will die." Gingery said his physicians' group performed over 1,000 surgeries at the hospital last year and he was scheduled for 3 that night. "It's a busy place, but they tell us it's not making money."
One of San Leandro Hospital's most ardent supporters again served as a cheerleader Friday. "Papa John" Kalafatich, who is also an employee at the facility, tearfully recounted for the audience news that his wife was rushed to the emergency room at San Leandro Hospital a few weeks ago. "If we didn't have that ER, she might not be here today," he said. "We have to stick together. You're sticking up for me, my wife and yourself."