3 hospitals face audit of profits
By Laura Cutland
SILICON VALLEY/SAN JOSE BUSINESS JOURNAL
Updated: 7:00 p.m. ET Dec. 25, 2005
Three Silicon Valley hospital operators are being investigated by state officials who are looking at their high profit margins and nonprofit tax benefits.
Lucile Packard Children’s Hospital, Mills-Peninsula Health Services and Kaiser Permanente are among 15 health care providers across the state to draw the scrutiny of the state Board of Equalization, which grants property tax exemptions to nonprofits.
Some hospitals may lose their exemption, which some estimate is worth between $500 million and $900 million a year statewide.
The board requires nonprofit hospitals to not exceed a profit margin of 10 percent. Those that do must spend the money on specific purposes, such as debt reduction, operating contingencies or capital improvements.
State regulators launched the probe in December 2004, requesting financial data from about 200 nonprofit hospitals operating in California. Of those, they found 15 had margins above their cap. They are now trying to determine if that excess money was used properly.
It’s about time.
Now where’s the audit at the Federal level?