Hospital CEO: N.C. budget cuts, tax-exemption changes threaten hospitals

The CEO of Carolinas HealthCare System complained Tuesday of "potentially devastating" budget cuts under consideration by the North Carolina legislature, arguing that lawmakers should not "correct their budget on the back of hospitals," the Charlotte Observer reported today.

The budget issue is just part of the problem, CEO Michael Tarwater told his board of directors. Nonprofits including hospitals receive sales tax refunds in North Carolina, but a bill introduced this year would cap annual refunds at $100,000, the Observer reported.

Most of the $400 million now refunded annually goes to hospitals, the newspaper said, suggesting hospitals would lose millions in revenue if the bill is passed.

The sales tax bill and other proposals to cut hospital reimbursement could "disrupt the delicate balance that exists between mission and margin," Tarwater told the board, according to the newspaper account.

The North Carolina Hospital Association is making similar arguments in its legislative campaign to state officials, the Observer noted. The first item on the legislative agenda: preserving tax exemptions.

"Because government sets rates and the uninsured pay what they can, hospitals are not like other businesses that can increase rates to offset the loss of tax exemptions," the association says on its website.

North Carolina isn't the only state debating changes to hospital tax exemptions. This spring, California lawmakers considered requiring nonprofit hospitals to spend at least 8 percent of their annual operating margin on charity care. In Pennsylvania, the Senate passed legislation giving the legislature sole authority over defining tax exemptions for hospitals and other public nonprofits.

Carolinas HealthCare System operates about 40 hospitals across the Carolinas.

To learn more:
- here's the Charlotte Observer article
- check out the association's legislative agenda