Dispute between hospitals and county spills over to Sarasota Memorial law
David Gulliver - posted 3:30 p.m. Tuesday, Jan. 12
A $37 million financial dispute between three Sarasota County hospitals and the county government has triggered a lobbying battle over the laws creating Sarasota Memorial Hospital and its tax authority.
It stems from three for-profit facilities -- Doctors Hospital of Sarasota, Englewood Community Hospital and Venice Regional Medical Center -- billing the county that amount for their costs of caring for poor and uninsured patients since late 2008.
They cite a piece of the 1950s laws establishing Sarasota Memorial Hospital, renewed in 2003, which sets out procedures for all Sarasota County hospitals to bill the local government for indigent care. The county has refused to pay, saying the law has been superseded by changes to the Florida Constitution in 1968, making any payment illegal.
That led the Sarasota County Commission, with Sarasota Memorial’s blessing, to ask state legislators in October to amend the Sarasota Memorial law to remove the billing provision.
But they quickly dropped that request when they realized it might lead to a “hijack” of the amendment and more extensive changes.
“Unfortunately, experience has taught us that even the most benign amendments to our enabling legislation can become political punching bags,” Sarasota Memorial leadership said in a Nov. 7 letter to state Sen. Michael Bennett, R-Bradenton. It was copied to other members of the county’s state delegation.
Lobbyists for HCA, the Nashville-based hospital chain that owns Doctors Hospital and Englewood Community Hospital, already had begun talking with the county’s state legislators about making changes to the law. And HCA countered Sarasota Memorial’s letter with its own on Dec. 21, faulting the hospital’s interpretation of the law and criticizing its tax revenue and profit margins.
On Friday, a Sarasota Memorial contingent appeared before the county delegation -- state Reps. Keith Fitzgerald, Doug Holder, Ron Reagan, and Sens. Mike Bennett and Nancy Detert -- at its annual hearing on local priorities.
Hospital leaders stressed the hospital’s charitable services, its investments in the community and in new projects. And they said that stemmed from the system established by law some 60 years ago -- an elected hospital board with authority to set a property tax rate, now worth about $55 million a year to the hospital.
“To the extent that anyone has any thoughts of changing our enabling legislation, it has worked well for 60 years," Chief Financial Officer David Verinder said. "Protect that at all costs.”
Those state lawmakers now are in a quandary. Through Sarasota Memorial’s well-attended annual briefing and tour for legislators, they are well aware that the hospital provides the vast majority of care for the county’s poor, and receives little or no direct payment for it.
But now they also are aware that other hospitals take on a smaller but significant share of that care, via a federal law that requires them to treat any patient who enters the emergency room. And they now know the hospitals may have a legal claim that Sarasota County pays them for it.
“We have to look at the legality of the thing, and I don’t know how we’re going to resolve it,” Sen. Bennett said.
And, as if it needed one more wrinkle, the dispute may be linked to one of the biggest battles of last year’s legislative session, one that likely will resurface again this year.
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In November 2008, Doctors Hospital and Englewood Community Hospital, both owned by HCA, started billing the county for the costs of care they provided to poor or uninsured patients.
In a cover letter, Robert Meade, CEO of Doctors Hospital, said the recession had caused a tremendous increase in indigent care that threatened the hospital’s ability to provide service to the community.
Venice Regional Medical Center, owned by Naples-based HMA, joined them in February, each bill accompanied by a sworn statement certifying that it reflects actual costs of care for Sarasota County residents.
The hospitals submitted the bills under a heretofore unnoticed provision of the law that established Sarasota Memorial, written in pieces over a decade starting in the late 1940s. The relevant section lays out a process for Sarasota Memorial to bill the county for indigent care, then continues:
“The said Board of County Commissioners shall in like manner reimburse any other hospital in Sarasota County, approved by the State Board of Health, for hospital services rendered to medically indigent persons as herein defined, upon like certification by such hospital and at such rates as shall not exceed those prescribed for such patients by hospitals owned and operated by said board.”
The bills continue to arrive monthly, totaling $37 million by November 2009. It was about that time when the two sides -- Sarasota County and Sarasota Memorial on one, and HCA on the other -- began their efforts to win over the legislators.
It seemed unusual for Sarasota Memorial to inject itself into what appears to be an issue between its competitors and the county. MacKenzie said the hospital was trying to educate the lawmakers on the issue.
Peter Taylor, its marketing director, was more blunt: “Like we've done in the past when for-profit hospitals have launched high-profile efforts to dip into public funds to subsidize their profit margins, SMH will work to counter misleading information.”
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The parties’ arguments center on two issues: the status of the law that appears to allow all county hospitals to bill for indigent care, and what constitutes a level of charity care that merits compensation from the county.
In an Oct. 5 letter, Sarasota County Commission Chairman Jon Thaxton asked the state’s Tallahassee delegation delegation to solve the problem. The letter suggested striking the billing clause -- which they called a “legislative artifact” -- from the Sarasota Memorial law.
But around that time, HCA also began talking to state lawmakers about the Sarasota Memorial law. Rep. Keith Fitzgerald, D-Sarasota, said he spoke with a lobbyist representing the company that week, and that he learned the company had been doing telephone polling on the issue of hospital taxes.
Both the county and HCA has suggested the delegation file a local bill to change the law, Fitzgerald said. But HCA representatives suggested no specific terms, both he and Bennett said.
That apparently prompted Sarasota County and Sarasota Memorial to abandon the idea of a quick fix to the hospital’s enabling legislation. In the Nov. 7 letter, Sarasota Memorial noted that the simple amendment had become a “punching bag,” and that pursuing it might open the door to changes the hospital opposes.
“The good work of our legislative delegation has kept SMH from suffering any lasting negative effects from previous attempts to hijack such amendments, but we are understandably reluctant to put ourselves, or you, in such a tenuous position.”
Instead, the letter, signed by MacKenzie and hospital board then-chairwoman Dr. Marguerite Malone, laid out the arguments that the enabling law’s indigent care billing provision was invalid.
The billing clause was based on the 1885 Florida Constitution’s mandate that counties provide hospital care for the aged, disabled and poor, the letter said. The 1968 rewrite of the constitution moved that to state law, and later expired, the hospital said.
With the mandate gone, neither Sarasota Memorial nor any other hospital could use the billing clause. “The billing and collection process from the county for this care has not been followed since it became clear that the county no longer had the obligation to fund that care,” the letter said.
It also countered HCA’s argument that the county compensates Sarasota Memorial for indigent care. The county merely collects a tax levied by the elected hospital board under the authority of the 1950 law, the letter said.
In a Dec. 21 letter, signed by registered lobbyist Stephen A. Ecenia, HCA offered another interpretation of the law. While Sarasota County’s indigent care law initially stemmed from the old Florida Constitution, it was reaffirmed as recently as seven years ago, when the state legislature overhauled and re-enacted Sarasota Memorial’s enabling law.
“Given that in 2003 the legislature could have deleted, but instead chose to re-enact the provisions regarding payment from the County for indigent care, it seems clear that the legislation was intended to fund indigent care in Sarasota County at all Sarasota County hospitals, not just SMH,” Ecenia wrote.
The letter also essentially accuses Sarasota Memorial of cherry-picking the enabling legislation, as the hospital cites the law’s provisions for the elected board’s taxing authority but calls for dropping the billing provision.
“It is ironic that the Board and SMH have no objection to those provisions in the pre-1968 legislation that serve their self-interest, but otherwise contend that the indigent care provisions that benefit the other hospitals in the County are obsolete and inapplicable,” Ecenia wrote.
Lawmakers believe both sides have a case. “The bottom line is, there’s a legitimate political dispute about what that language means,” Fitzgerald said.
The lobbying, though, doesn’t stop at the language. The two sides also spar over what constitutes charity care.
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Sarasota Memorial’s letter notes it is the only county hospital still delivering babies -- a tally that rose 31 percent when Doctors Hospital ended its obstetrics program in 2002. It also is the only hospital providing psychiatric care, and has the region’s only Level III neonatal intensive care unit.
The letter also cited the 80,000 visits to Sarasota Memorial’s emergency room each year, one-quarter of them from uninsured and Medicaid patients, as a demonstration of its charity care. Its new North Port free-standing emergency room adds to that total and will lose $4 million this year, it said.
“Sarasota Memorial re-invests its funds and resources to the best interests of our one shareholder: the Sarasota community,” the letter said.
HCA acknowledged those community services, but said it was a sign of the economic imbalance between the two sides.
In 2008, Doctors Hospital had a slight net loss of $114,000 and Englewood lost $1.7 million, while Venice Regional lost $2.9 million, all after taxes. Sarasota Memorial had an operating loss of $22.4 million, but a net profit of $56 million after its property tax and investment income.
“The fact of the matter is that the various services SMH touts in the Memorandum are largely the result of the generosity of Sarasota County taxpayers, which include Englewood, Doctors and Venice Regional,” the HCA letter said.
Both sides then go on to make questionable use of broader HCA corporate-wide figures to make points.
Sarasota Memorial cites HCA’s third-quarter results, which show that since last year, income before taxes has almost doubled and net cash from operations increased $900 million, and questions why the local affiliates seek more money.
HCA compares the collective figures for its Florida hospitals to Sarasota Memorial’s figures. The letter claims HCA provides 16 percent of the state’s charity emergency department visits and 14 percent of the state’s charity births, where Sarasota Memorial accounts for about 1 percent of each. But it does not address why it is comparing totals for 39 hospitals to a single hospital's results.
It’s little wonder the legislators are about ready to throw up their hands.
“It’s a problem,” Bennett said, “It’s one we have to learn a lot more about.”
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One one hand, lawmakers see the argument that Sarasota Memorial is providing money-losing services no one else will supply, and that its tax revenue makes a high-quality hospital possible.
“Are the for-profits going to open up more beds for psychiatric cases? Are they going to open up more beds for delivering babies? You have to look at whole picture,” Bennett said. "If the Sarasota Memorial profit margin comes down, will they still be able to provide the level of care they have now, the top-flight cardiac unit, the NICU?”
But they also see the three for-profit hospitals’ argument, that the federal law known as EMTALA amounts to an unfunded mandate.
Intended to prevent hospitals from dumping uninsured patients, it requires them to assess any patient that enters their emergency rooms, regardless of ability to pay, and treat and stabilize any true emergency cases. Most hospitals, though, treat all levels of cases, both out of a sense of responsibility and to avoid a potential violation of the law.
“If under federal law we’re forcing them take in indigent patients, then it seems to me there has to be some kind of reimbursement for them,” Bennett said.
Two possible solutions: a special taxing district to pay hospitals for indigent care, akin to Hillsborough County’s system, or using some of Sarasota Memorial’s untapped millage—it can levy up to 2 mills of value, about twice its current levy—to assist the other hospitals. Thaxton, the county commission chair, suggested both in a letter to Sen. Detert, but acknowledges that neither is likely to find support.
Bennett and other lawmakers want to avoid the whole mess. “I would rather see it resolved outside of state law,” Bennett said. “It’s Sarasota County money. It’s not state money.”
Fitzgerald said the state legislature probably is not the right place to settle for the hospitals to settle their dispute, which is essentially about the county refusing to pay a bill. “The logical path to take would be for someone to file a lawsuit,” he said.
But the issue may become enfolded in a bigger drama playing out in Tallahassee. “This is tied up in a larger dispute, a political battle between the public hospitals and the private hospitals about how indigent care funds are divided up generally,” Fitzgerald said.
Last year, a little-known panel called the Low Income Pool Council became one of the hottest issues, packing hearing rooms with lobbyists.
The LIP Council, as it is called, was established via the state’s Medicaid reform project and allocates up to $1 billion in aid to hospitals -- most of it to the state’s non-profit hospitals. Sarasota Memorial received about $5.5 million from the council last year.
An interest group with secret backers began pushing for the council to be eliminated. That failed, but the legislature passed a bill -- backed by HCA -- that diluted the non-profits’ clout on the council. At the time, all parties said they were happy with the compromise, but Fitzgerald said he believes the issue will return this session.
In that sense, the complex dispute comes down to the same issue as most: “It always comes down to money and whose ox is going to get gored,” Bennett said.
