Tax change would hurt health-care systems

  • Posted: Wednesday, June 19, 2013 12:15 a.m.

Carolinas HealthCare System and Novant Health are united in our deep commitment and unwavering passion to provide all citizens of the communities we serve with best-in-class patient care.

And as nonprofits, we lead and govern our organizations under the expectation that we will accept substantially less than what it costs us to provide care for Medicare, Medicaid, underinsured and uninsured patients, a population that accounts for more than 60 percent of the care we provide.


Last year alone Carolinas HealthCare System and Novant Health provided $407 million in charity care and uninsured discounts, not counting the nearly $1 billion of unreimbursed essential care for Medicaid and Medicare patients. The small tax refund of less than 7 percent of that $407 million did not come close to helping us offset those costs. And now a proposal to cap or eliminate the sales and use tax refund for all nonprofits in the state threatens even this small bit of help we do receive.

The financial intricacies surrounding the health-care industry are gravely misunderstood, and more transparency and dialogue are needed as we move forward in partnership with our communities, providers and payers. But certainly we can all agree that a payment model where over 60 percent of the health care services are provided below cost is a broken model. Nonprofit health systems will forever require a small margin to fulfill our mission.

Health care is the fifth most capital-intensive of all U.S. industries. The technology, research and expertise that drive healthy communities — and healthy economies — require financial strength and viability. But not without financial discipline. The operating margins, which historically run at industry averages and well below margins of other industries, are shared publicly by both health systems and are an indication of careful discipline and a personal belief that we are stewards of our communities’ health resources. And unlike any other time in history, hospitals and health systems are preparing to weather unprecedented change and turbulence. As any responsible household or business would, our healthcare systems are managing resources so we will never have to deny essential medical care to anyone, ever.

At this very moment area hospitals and providers are adjusting to substantial Medicare payment reductions that started in 2010 — and have continued — as part of the federal government’s Affordable Care Act (ACA). These cuts were meant to pay for expanded coverage for the uninsured, which is now on hold in North and South Carolina. Sequestration cuts added an additional 2 percent reduction to Medicare payments for hospitals already losing 10 percent on Medicare patients.

If legislators continue to believe that we are not financially challenged in our ability to execute our mission, we put one of the strongest economic engines in the Carolinas at risk. We also risk the long-term viability of the nonprofit model that is currently blind to the patient’s ability to pay. Eliminating or capping nonprofit sales and use tax refunds will certainly force hospitals and other nonprofits to eventually curtail the services they provide.

As our health systems face the most unpredictable and uncertain time in our history, this is not the time to use them as the mechanism to pay for a reduction of the corporate tax. We applaud the General Assembly’s desire to improve our state’s ability to recruit business to North Carolina, and we urge our elected officials to preserve our ability to maintain our mission and continue to provide the essential services to the patients we serve.

Edward J. Brown III is chairman of the board of Carolinas HealthCare System. Michael B. Baughan is chairman of the board of Novant Health.

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