BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT JANUARY 22, 2009 ITEM P3b2 OTHER ADMINISTRATIVE MATTERS DEPUTY DIRECTOR'S REPORT SUPPLEMENTAL REPORTING REQUIREMENTS FOR NONPROFIT HOSPITALS Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Betty Yee of Equalization: Acting Chair 5 Bill Leonard 6 Member 7 Michelle Steel Member 8 Marcy Jo Mandel 9 Appearing for John Chiang, State Controller 10 (per Government Code Section 7.9) 11 Diane Olson 12 Chief, Board Proceedings Division 13 14 Board of Equalization Staff: David Gau 15 Mary Ann Alonzo 16 Lisa Thompson 17 18 19 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 ANNE McLEOD 8 4 HARRY OSBORNE 11 5 SHEREETA LANE 13 6 KYLE SERRETTE 21 7 BETH CAPELL 24 8 MICHAEL BOLDEN 27 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 Sacramento, California 2 January 22, 2009 3 ---oOO--- 4 MS. OLSON: Our next item on the agenda is 5 P3b2, Supplemental Reporting Requirements for Nonprofit 6 Hospitals. And we have seven speakers. 7 MS. YEE: Okay. Let's go ahead and have the 8 speakers come forward. Let me see if -- I think I have 9 your names. 10 Actually, let me have the opponents of the 11 proposal come forward first. Or those who have concerns 12 about the proposal. 13 Okay. Thank you. Mr. Gau, do you want to 14 introduce the issue and I can certainly chime in. 15 MR. GAU: I will introduce it. Thank you. 16 The second item this afternoon on my Deputy 17 Director's Report is the Chair's proposal for the Board 18 to consider supplemental reporting requirements for 19 nonprofit hospitals eligible for the property tax 20 welfare exemption. 21 The proposal by the Chair consists of examining 22 approximately one-third of the hospital organizational 23 clearance certificate holders during the 2009 periodic 24 claim review process and also proposes utilizing a new 25 form, BOE 278H, a supplemental reporting form for 26 organizational clearance certificate holders for 27 nonprofit hospital organizations. 28 MS. YEE: Okay. Thank you very much. Members, 4 1 let me take an opportunity just to provide some context 2 here. The issue of nonprofit hospitals continues to be 3 a topic of interest certainly with our State 4 Legislature. It's been a topic of interest certainly 5 with respect to this Board relative to our 6 administration of the welfare exemption for nonprofit 7 hospitals. 8 In the course of responding to legislative 9 inquiries for information, certainly from my office as 10 well as from the Board generally, there has been at 11 least identified in my mind, and I am very interested in 12 what the speakers have to say in this regard, some lack 13 of consistent reporting as relates to hospital financial 14 information. 15 And the Bureau of State Audits has commented on 16 this issue and there have been Legislative attempts to 17 try to get a better grasp on reporting by hospitals. 18 Let me just say at the outset, this is not 19 certainly an attempt on my part, and I don't want to put 20 the Board in this position of really -- this is not a 21 gotcha game, we just want information. And part of the 22 frustration is that I feel that we have a duty to the 23 extent that we are reviewing hospitals' financials on a 24 periodic basis to be in a position to request additional 25 information. This is information that I believe 26 hospitals do have, although I certainly have been 27 hearing from hospitals since this proposal has been made 28 public about either the lack of this information or the 5 1 fact that it's already being reported. 2 I find it curious that it's both and not one or 3 the other. So, I'm curious to learn about that. I also 4 know that the IRS in the midst of getting its own 5 requirement for additional reporting on their Form 990 6 Schedule H from these hospitals beginning in 2010 for 7 the 2009 tax year. 8 I will also remind this Board although we did 9 not discuss it, it did not -- I did pull the matter 10 back. I did come forward in the Spring of last year 11 with a proposal for a rule change to look at 12 establishing a charity care standard for nonprofit 13 hospitals. The reason I pulled back that proposal is 14 because after talking to OSHPD and to other information 15 sources it became clear we didn't have reliable 16 information to do that. And I think that's been 17 something the Legislature has grappled with. It 18 certainly is something that I continue to be interested 19 in and would like to hear the concerns relative to this 20 proposal. 21 There are hospitals identified in this 22 proposal. Again, this is not an effort to target. We 23 were trying to deal with workload constraints, as well 24 as what we could do with this initial group that would 25 provide a represent -- representative sample, both 26 geographically and size of hospital. 27 So, with that backdrop I think what I'd like to 28 do is to hear from the speakers so that we can see what 6 1 we can do relative to moving this effort forward and 2 certainly taking any concerns into consideration. 3 So if you'll identify yourselves for the record, 4 and you have three minutes for your comments. ---oOo--- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 1 ANNE McLEOD 2 MS. McLEOD: Okay, great. Thank you very much. 3 I am Anne McLeod. I'm representing the California 4 Hospital Association today. I'm actually representing 5 all of California's Not-for-profit Hospitals. The 6 hospitals have expressed several concerns that I have 7 outlined in a letter to -- to you, Member Yee, as well 8 as copies to everyone else on the Board. I hope that 9 you do have a copy of that. 10 Of significant concern is how we discovered 11 this agenda item through our normal course of reviewing 12 publicly available meeting materials. Neither CHA nor 13 the hospitals were contacted prior to allow for input 14 and comments. In fact, the first time I spoke with 15 anyone was Friday night at 5:30 with Ms. Yee, and thank 16 you for that call. It was helpful. 17 As a result of this we believe the adoption of 18 the proposed form today may be a violation of the 19 California Administrative Procedures Act, or the APA. 20 And based on our preliminary review of the proposed form 21 we are raising multiple concerns and are offering 22 solutions for you, as well. 23 First, the form includes questions that appear 24 to reach beyond the scope and authority needed to 25 determine property tax exemptions. For example, it's 26 not necessary to know how much bad debt was related to 27 uninsured patients versus underinsured patients to 28 determine property tax exemptions. 8 1 Next, hospitals already report the relevant 2 information your staff needs to make exemption 3 determinations. In my quick review I found that 4 questions 1, 2, 3, 4, 9, 10, 11 and 12 were already 5 available through public OSHPD files. We support the 6 use of the IRS's new Schedule H in performing your 7 review of nonprofit hospitals. Unfortunately, the IRS 8 does not require hospitals to complete it until 2010. 9 The IRS recognizes the complexities associated 10 with configuring the reporting systems required to 11 conform with the new schedule. This we believe is not a 12 time to be imposing additional duplicative 13 administrative burdens on hospitals. In this economic 14 downturn, hospitals have reported deteriorated financial 15 conditions, higher costs related to borrowing, if they 16 can even access the capital. And -- and they are relied 17 upon to provide care to the growing number of uninsured 18 and Medi-Cal beneficiaries in the State. 19 Hospitals are vital to the recovery of 20 California's economy, providing jobs in health care for 21 all. We believe the proposed form does not mirror that 22 of Schedule H and it asks for hospitals to provide four 23 years of information in a format that they are not even 24 required to submit until 2010. 25 Hospitals absolutely cannot provide the 26 information that the BOE is requesting. And with that 27 we're concerned about what certainty California's 28 hospitals not -- nonprofit hospitals have that they 9 1 won't be penalized for not being able to provide the 2 answers in the context and the format you propose. 3 We urge you to delay the implementation of the 4 form and provide hospitals with the opportunity to -- 5 MS. OLSON: Time has expired 6 MS. McLEOD: -- work with your staff to resolve 7 our concerns while assuring the Board that you get the 8 information you need. 9 Thank you very much. 10 MS. YEE: Thank you. Next speaker. 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 1 HARRYOSBORNE 2 MR. OSBORNE: Madam Chair, Members, Harry 3 Osborne with the Alliance of Catholic Healthcare that 4 has about 60 nonprofit hospitals in the State of 5 California. 6 We first of all agree with the request that the 7 CHA has made here. We think this form is not ready at 8 this point in time to be promulgated. There are many 9 technical problems with it and it's simply not ready. 10 Aside from the technical problems, one of the 11 problems that we have is that it's extremely unclear how 12 these hospitals were selected and what the selection 13 criteria is. We think there should be some attention 14 paid to that. 15 With respect to this -- this very large issue 16 of reporting of community benefits, this was one of the 17 key issues in AB 2942, which was before the Legislature 18 last session, which failed passage, which will probably 19 be before the Legislature next year. We do not 20 understand the urgency here to pass a flawed form. 21 This -- essentially, we think the correct thing 22 to do is to let the new Federal reporting forms go into 23 effect and we say this and have made this argument in 24 the past. For that to happen, hospitals need to 25 change -- make accounting system changes and documents 26 need to be properly coded so that you can run them 27 through data processing. These things have not happened 28 and there are -- in -- in this form that you have there 11 1 is information that cannot currently be gathered. 2 We agree with CHA. There is no need to 3 duplicate information that hospitals already submit to 4 OSHPD. About three-fourths of the information on this 5 form could be quick -- more quickly, and in your 6 interest if you want the information more quickly you 7 could for past periods go to OSHPD and get a great deal 8 of what is on your survey form. 9 And we think you ought to in order to keep 10 hospital costs down. 11 And, finally, we don't really understand where 12 all of this is leading and how it is particularly 13 helpful in the public debate about reporting of 14 community benefit activities of -- with hospitals. 15 Thank you. 16 MS. YEE: Thank you. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 12 1 SHEREETA LANE . 2 MS. LANE: Madam Chair, Members, my name is 3 Shereeta Lane, and I'm here today representing the 4 California's Children's Hospitals. These are the eight 5 regional not-for-profit hospitals that treat the most 6 vulnerable Californians, the sick and injured child. 7 These hospitals collectively are experiencing a negative 8 operating margin and also collectively see greater than 9 60 percent Medi-Cal patients. And as Ms. McLeod 10 mentioned, that is only going -- that's only increasing. 11 The New York Times today -- talked today about 12 an increase of ten percent in Medicaid beneficiaries. 13 So, we can expect that the numbers in our hospitals will 14 increase. Some of our hospitals see upwards of 80 15 percent -- 80 percent of their patient base is Medicaid. 16 And we all know that -- what a poor payor Medi-Cal is in 17 this State, unfortunately. 18 We agree with the comments made by my 19 colleagues from the Alliance and from the California 20 Hospital Association. We would urge you to work with 21 us, to work with the industry, and to determine how best 22 to obtain the information that you need so that your 23 needs are met. We do feel that both OSHPD and the 24 upcoming Schedule H that will be reported to the IRS 25 would be appropriate in determining this information. 26 We stand ready to work with you but do urge you 27 to just slow this down so that you can work with us to 28 ensure that hospitals are not unnecessarily burdened 13 1 with additional administrative duties. 2 Thank you. 3 MS. YEE: Thank you. Let me have the rest of 4 the speakers on this side come forward. 5 Michael Bolden. Kyle Serrette. And Beth 6 Capell. 7 And while you're coming forward, Ms. Alonzo 8 from our Legal Department, can you speak to the 9 authority issue with regard to the authority of this 10 Board to pursue this effort. 11 MS. ALONZO: I -- it is our opinion that 12 they're incorrect that the Board doesn't have authority 13 to prescribe this form. The Board's authority is -- is 14 clearly stated in statutes that not only authorize it 15 but mandate that they prescribe forms for -- for all 16 property tax exemptions, not just the exemption 17 administered by the Board. 18 As to the scope of the questions, the -- the 19 Board has received this information in a different 20 format previously, which Lisa can speak to. But 21 essentially the fact that some of these questions 22 haven't been asked before doesn't make -- make it 23 outside the scope of the Board's authority. 24 If the Board has a valid reason to ask these 25 questions, which is that there is not reliable 26 information available, and we have already heard that 27 the information reported to OSHPD is not reliable 28 because there aren't -- their statutes are not written 14 1 like the R & T Code where there are specifics -- such 2 specific requirements that everybody realizes what's 3 being asked. 4 Consequently, there's a lot of reporting that 5 is what I consider free flow. And, you know, people 6 decide, okay, for -- for my organization this is what -- 7 what I construe to be a community benefit; or for my 8 organization this is what I construe to be something 9 else. 10 And so, what you have is apples and -- and 11 oranges and -- and that information is not beneficial to 12 us and we wouldn't want to essentially cause the 13 hospital industry any problems by using, you know, 14 inferior information that can't be relied upon. It's a 15 disservice to them if we were to use it to make any 16 policy decisions. 17 I guess finally I would like to -- to respond 18 to the fact that the -- the Board -- there's judicial 19 precedent that says that just because you don't have 20 specific words in your statute, an agency is not 21 restricted by -- by the concept that every -- everything 22 that you ask on a form has to be stated in a statute 23 somewhere. If that were the case, agencies wouldn't 24 even be able to function. 25 And so, there's -- there's clear judicial 26 authority that says that if something isn't in a statute 27 that -- that that doesn't mean that -- that the form is 28 not within the scope of the agency's jurisdiction. 15 1 And so, I would like to point that out. And I 2 absolutely disagree that this form would represent an 3 underground regulation. There is nothing mandatory 4 about this form. There's no penalty associated. Nor 5 does it impose a substantial requirement on the 6 hospitals with respect to -- its not imposing charity 7 care. It's not imposing anything. It's simply saying, 8 tell us what you do and how you do it. 9 And that information doesn't exist in a 10 reliable form anywhere. 11 And that -- as the Chairwoman knows, has been 12 out there because the State auditors have determined 13 that already twice, that we need to have reliable 14 information from this industry. 15 MS. YEE: Mr. Leonard. 16 MR. LEONARD: Thank you, Ms. Yee. 17 I -- I totally agree with your conclusion that 18 we have the authority to publish such a form and ask the 19 questions we're proposing to ask. 20 Mine's a more narrow question. It's in my 21 memory most forms we've adopted have gone through our 22 interested parties and our regulatory process, and 23 we've -- we've actually published them as part of the 24 body of regulations that anybody can access. 25 Is -- is that what's being proposed here or are 26 we doing something different? So it's not a question of 27 whether they have authority, it's -- my question's on 28 our process. 16 1 MS. YEE: On our process. Mr. Leonard, I 2 brought this forward. There has been not full input 3 with respect to development of the form. And, actually, 4 most of the input has been from me and my office in 5 consultation with others and even some local 6 jurisdictions, as well, who are interested in 7 implementing locally-adopted charity care policies. 8 The intent that I had here, and really the 9 input that I have, and I'm learning from the speakers 10 today, that in preparation for reporting on the Schedule 11 H's in 2010 that this information -- I mean, I have to 12 say on the outset, I can't believe this information is 13 not available. I -- I just can't. In terms of how a 14 hospital does financial accounting. I -- and kind of 15 how you look at doing business year to year and what 16 your bottom line is. I just can't believe this 17 information is not available. 18 I can certainly engage in a conversation and 19 discussion about the format in which we're asking for 20 the information, but I do believe the information is 21 there. 22 My hope is that once we air the concerns about 23 this particular form today, if there is an ability -- if 24 there is a need to bring all the parties together, I 25 would like to do that so that we can come to agreement 26 about the format that would best serve our purpose in 27 getting this information. 28 So, I -- I would entertain a broader process to 17 1 get additional input. 2 I will also say that I do want this 3 supplemental reporting in place beginning this year. 4 Part of what I am feeling frankly a little pressure 5 about is every year, and the industry knows this, as 6 well as the proponents of this proposal, there is 7 Legislative interest in this. And I think the 8 frustration has been where does there exist reliable 9 consistent reporting data at the State level to guide 10 their policy work? 11 So -- and I just saw an opportunity for us to 12 the extent that we have a relationship with these 13 nonprofit hospitals. I am not wedded to the universe of 14 hospitals that have been chosen here. I mentioned 15 earlier the list is here because of workload constraints 16 and staffing constraints. If people are concerned that 17 not all hospitals are on here, I will put them all on 18 here, but this is not my attempt to cherry-pick at all, 19 but really to have more of a representative sample, at 20 least for this initial form -- initial inquiry. 21 MR. LEONARD: And my question on process is not 22 disagreement with you on policy. I -- I think we need 23 to do this. I think information will be useful and I 24 think it will help set standards as to whether or not 25 the property tax exemption is granted. And particularly 26 where we have a business in which there's a healthy mix 27 of nonprofits and profits, I can't -- it's hard to find 28 an interesting analogy to that. I suppose, a health -- 18 1 for-profit health clubs and the Boy Scouts and Girl 2 Scouts, you know, maybe, but it -- there -- this one's 3 much closer. I -- I can't tell legal status of a 4 hospital driving by. You know, maybe with a name on the 5 door, but I'm not even sure of that. 6 So, I'm -- I agree with you on the policy. 7 It's just I want to get there in -- in -- I guess the 8 method that's the most bulletproof, and if it's doing an 9 interested parties process I'd be happy to participate 10 and get information, make sure the -- the understanding 11 of why each of the questions you're suggesting is 12 needed, how our staff will take that information, use it 13 to make a judgment as to whether they qualify under our 14 Welfare exemption law. 15 MS. YEE: Sure. 16 MR. LEONARD: That -- that that's an 17 appropriate discussion to take place. 18 MS. YEE: And -- and to the extent that we can 19 get some cooperation from OSHPD with data that already 20 exists, I would love nothing more. I'm not interested 21 in duplicating efforts. 22 But, frankly, that data has not been very 23 reliable. When we -- when my office began work on this 24 project with the assistance of the Board staff, we could 25 not even get consistent responses back on definitional 26 questions from OSHPD. 27 So, that's the level of reliability that we 28 have been working with relative to what's already out 19 1 there. 2 Let's hear from the next speakers and then I do 3 want to get back to this issue of process going forward. 4 MR. LEONARD: Thank you. 5 MS. YEE: Okay. Please introduce yourselves 6 for the record. You have three minutes for your 7 comments. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 1 KYLESERRETTE 2 MR. SERRETTE: Hi. My name is Kyle Serrette 3 and I'm with the United Nurses Associations of 4 California. And I'm here to support, Board Member Yee, 5 supplemental reporting form for nonprofit hospitals. 6 Our organization was able to fully analyze the 7 supplemental reporting form in the time given and I'm 8 glad to see that other organizations were able to give 9 their input in -- in the same period of time. 10 California citizens invest hundreds of millions 11 of dollars in taxpayer dollars every year to nonprofit 12 hospitals. And our organization, UNAC and AFSCME, we 13 believe that we deserve to know whether or not we're 14 getting a proper return on that investment. 15 We believe more information is needed. And we 16 believe the new form will bring us closer to that goal, 17 to be able to get the data that's needed. 18 We also believe that the Board of Equalization 19 has a broad authority. We're glad to see that the Board 20 is utili -- finally utilizing the full authority under 21 Section 254.6 of the Revenue and Taxation Code to obtain 22 that information that's necessary. 23 The new reporting requirements will give the 24 Board the tools that they need to confidently tell us 25 whether our investment is sound in the nonprofit 26 hospitals. The -- some of the information in this form, 27 it's not available anywhere else. So I -- so we really 28 do feel like the information is needed. 21 1 And from our standpoint, we don't feel like we 2 should fear more information. After all, information is 3 the only thing that the Board is asking from the 4 hospitals. No -- no new requirements out there 5 financially. 6 And if we think about the current financial 7 crises that's going on in our country, wouldn't have -- 8 more information have been helpful to us earlier? 9 So, today we look at the report that was given 10 out by the California Bureau of State Audits, and they 11 show that inconsistent data obscure the economic value 12 of nonprofit hospitals. And they concluded that pretty 13 amazingly that the uncompensated care costs by 14 nonprofits and for-profits was significant -- wasn't 15 significantly different. 16 Should we not get more information to figure 17 out why that is? 18 The fact that hospitals sit next -- right next 19 to each other, both two nonprofit hospitals, and they 20 provide significantly different levels of charity care, 21 that -- why is that? If they're the same size 22 hospitals, and they're in the same community. Why do 23 they provide these different levels? 24 More data, more information is needed. 25 So, in conclusion, we find that it's kind of 26 alarming that the information that we need to analyze 27 this is not there and accessible. And we feel like the 28 form in its current form is -- is sufficient and -- and 22 1 fair and -- 2 MS. OLSON: Time has expired. 3 MR. SERRETTE: -- allow us to be able to see 4 that nonprofit and for-profit hospitals -- what the 5 difference is. Thank you. 6 MS. YEE: Thank you. 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 1 BETHCAPELL 2 MS. CAPELL: Beth Capell on behalf of the 3 Service Employees International Union, and we'd like to 4 concur with Board Member Leonard that we, too, have 5 difficulty telling the difference between a for-profit 6 investor-owned hospital and a nonprofit hospital. 7 We note that this is an industry in which more 8 than ten percent -- about ten percent of the hospitals 9 in California are investor-owned and pay property taxes, 10 corporate income taxes, unemployment insurance taxes and 11 other taxes. 12 We also note that it's a $60 billion industry 13 or more in California. This is not -- these are not 14 small organizations. These are not small nonprofits. 15 These are large corporate enterprises. 16 We further note that there is no requirement 17 that a hospital operate an Emergency Room. And some 18 hospitals do not. And if a hospital does not operate an 19 Emergency Room, there is no requirement that they accept 20 persons who are uninsured or persons who are covered by 21 Medi-Cal. And, indeed, hospitals are not required to 22 accept -- to provide care to persons who are uninsured. 23 There is no requirement in California or in 24 Federal law that hospitals provide free or charity care 25 to any person. Until 2006 it was the custom in 26 California for hospitals to charge the uninsured four or 27 five times as much as what they charge persons with 28 insurance and Medicare and Medi-Cal. As a result of 24 1 changes in State law, hospitals can no longer do that. 2 That law did not discriminate between for-profits or 3 nonprofits. 4 We've been pleased to work at the Federal level 5 with Senators Grassley and Baucus and have always 6 regarded this as a bipartisan effort to get better 7 information and better reporting because our experience 8 has been that both investor-owned hospitals and 9 nonprofits vary greatly in what they do to provide care 10 for the community. 11 California law expressly precludes standardized 12 reporting to OSHPD on community benefits. That's 13 something that we tried to correct last year in AB 2942. 14 The parties which are opposing this proposal opposed 15 that measure, as well. They have been consistent in 16 their opposition to such efforts, and we are 17 disappointed to see them again opposing what is a fairly 18 modest information request by this Board of only a 19 subset of hospitals. 20 As we reviewed the list of hospitals that have 21 been selected, we recognize that there are both larger 22 and smaller institutions, but we note that almost all of 23 the smaller institutions are subsidiaries of large 24 corporate entities which presumably have the capacity to 25 do the reporting. 26 And specifically with respect to some of the 27 data that is not provided to OSHPD, we would note 28 that -- 25 1 MS. OLSON: Time has expired. 2 MS. CAPELL: Yes, thank you. 3 MS. YEE: Can you sum up your -- 4 MS. CAPELL: Yeah, thank you. 5 We would be happy to provide further 6 information on the lack of reliability on the data that 7 is reported to OSHPD and to note that the data reported 8 to OSHPD does not include the use of revenues in excess 9 of profits -- in excess of expenditures above ten 10 percent and what the money is used for, which we believe 11 is a particular concern to this Board. 12 Thank you. 13 MS. YEE: Thank you. Next speaker. 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 1 MICHAELBOLDEN 2 MR. BOLDEN: Good morning, Madam Chair and 3 Members. Michael Bolden representing the American 4 Federation of State, County and Municipal Employees. 5 I'd like to just echo Mr. Serrette and 6 Ms. Capell's comments. But I'd just like to add that as 7 you're aware and as previously stated, we are living in 8 a -- an era of tremendous economic uncertainty. And 9 during an era such as this, fiscal prudence demands 10 increased transparency and accountability. And that is 11 being applied to government, businesses as well as to 12 individuals. And we believe that nonprofits and in this 13 particular case hospitals that are nonprofit should be 14 held to no less of a standard. And we also support this 15 measure 16 MS. YEE: Thank you very much. 17 Questions or comments, Members? Mr. Leonard. 18 MR. LEONARD: Ms. Yee, I just want to respond 19 to one point you made, if -- if I really thought this 20 form had no consequences other than additional 21 information I'd be very skeptical of it. I expect it to 22 have consequences. And I appreciate your altruism in 23 supporting it because if a nonprofit loses their 24 nonprofit status and pays property taxes, your members 25 may be laid off to pay the property tax bill. 26 But I just -- there will be consequences. If 27 there is a nonprofit hospital that is behaving as a 28 for-profit in substance, I -- I think our staff will 27 1 recommend that their exemption be denied and there will 2 be a consequence. 3 If it was just a form just to kind of gather 4 information for you guys to explore, I'm -- I'm not with 5 you on that. I mean, I'm -- I'm looking for better 6 information to make better decisions. 7 Thank you, Ms. Yee. 8 MS. YEE: Thank you. 9 Okay. Other questions or comments, Members? 10 Okay. Let me suggest this. And I want to 11 thank all the speakers that have come forward today. 12 Again, I'm sensitive to this issue of 13 duplication; certainly very sensitive to the issue of 14 additional burden with respect to the hospitals having 15 to report this information, although I think all of us 16 would agree the goal of having this additional 17 information and greater transparency really is key here. 18 Let me suggest -- I'd like to put this through 19 a -- an interested parties process for the purpose -- 20 for the purpose of going through the form that's 21 currently before us, and really looking at -- and I 22 would like the industries' involvement here, but really 23 looking at where we currently have existing data to meet 24 the questions that are being asked here. 25 And if it's OSHPD, let's really figure out 26 whether it's consistently reported. Whether it's data 27 that's reliable that we can actually get our hands on in 28 a format that we can use for our purposes. 28 1 Secondly, I would like the supplemental 2 reporting to take place sometime this year. And this is 3 in recognition of what the Schedule 990 -- of the 4 Schedule H from the 990s will also be asking. Some of 5 the questions are related to what the 990 is asking; 6 some of them are not. I do believe that many of the 7 questions that are on the supplemental reporting form 8 are really the basis of what -- you know, the higher 9 level information that's required on the Schedule H 10 really will be -- based on. 11 So, I also would like to understand from the 12 hospitals which of these questions are not ones -- at 13 this time that you're able to produce any response to. 14 And why that is. 15 And I'd like to see this matter back, frankly, 16 probably in April so that we have time to get it out to 17 the hospitals and to allow for some back and forth to 18 the extent that there are individual circumstances that 19 our staff needs to work with the hospitals on. 20 Staff, do you have a response to that? I'm 21 more concerned about the time line. 22 MS. THOMPSON: If it comes back to the Board in 23 April I'm not certain of the meeting, we could send out 24 a form in May sometime and require that due. 25 MS. MANDEL: The meeting is the 15th and 16th, 26 I think, of April. 27 MS. THOMPSON: Okay. 28 MS. YEE: Okay. 29 1 And I guess just relative to the interested 2 parties process leading up to that point, does 3 that allow for adequate notice in -- getting the parties 4 together? 5 MS. THOMPSON: I guess we could talk and try to 6 figure out what your audience would be, as far as 7 interested parties. Are you looking at a certain 8 percentage of the OCC holders? Maybe those selected for 9 review or -- 10 MR. GAU: No, maybe I can -- I think what 11 you're looking for, many of the people, obviously, have 12 come to the floor today, to the front here, the 13 associations, those people that we want to engage in the 14 interested parties process. 15 MS. YEE: Yes. Yes. 16 MR. GAU: And to work from the form that has 17 been laid out and to -- 18 MS. YEE: And to understand the concerns -- 19 MR. GAU: -- address the issues. 20 MS. YEE: -- to understand where -- 21 MR. GAU: Right. 22 MS. YEE: -- we may have a duplication of 23 efforts and to get some assistance in terms of how we 24 can then make the supplemental reporting easier -- 25 MR. GAU: Right. 26 MS. YEE: -- for hospitals to perform. But to 27 also help us identify and obtain, you know, some of the 28 information that currently exists. 30 1 MR. GAU: Correct. 2 MS. YEE: Which we are having a difficult time 3 doing. 4 MR. GAU: So with the draft that's out in front 5 of the -- you know, publicly now, we can work from that, 6 get an interested parties meeting scheduled and lay out 7 a time line and make everyone aware of that time line in 8 order to bring it back to the Board for -- 9 MS. YEE: Yes. 10 MR. GAU: -- the April meeting. 11 MS. THOMPSON: Yes, right. 12 MR. GAU: It -- it is -- you know, obviously 13 it's a -- they're going to -- everybody is going to have 14 to work and bring matters and issues to the table timely 15 and we'll be pressing that forward. 16 MS. YEE: Okay. In some of my conversations 17 with the Association representatives prior to this 18 meeting, I know they've been putting some more thought 19 in consulting with their members on input to us about 20 specific concerns. 21 So, I would probably allow more time for them 22 to complete that process and then -- before we schedule 23 that first interested parties meeting. So -- 24 MR. GAU: Okay. 25 MS. YEE: -- allowing for at least a couple 26 weeks out -- 27 MR. GAU: Oh, certainly. 28 MS. YEE: -- so we get notice out about a 31 1 meeting. 2 MR. GAU: Oh, yes. 3 MS. THOMPSON: And we can go from the sign-in 4 sheets, the speaker sign-in sheets -- 5 MS. YEE: Yes. 6 MS. THOMPSON: -- to determine who the 7 participants would be. 8 MS. YEE: Okay. Very well. Other thoughts, 9 Members? 10 Ms. Mandel. 11 MS. MANDEL: Well, the Controller supports the 12 concept of -- and the information, so -- 13 MS. YEE: Okay, thank you. 14 Okay. 15 MR. LEONARD: This procedure -- what's our 16 timetable on -- for Welfare exemptions? 17 MS. THOMPSON: The Welfare exemption claims are 18 due February 15. 19 MR. LEONARD: For which year? 20 MS. THOMPSON: Annually, they must be filed 21 with the County Assessors. 22 MR. LEONARD: I know they're annual, but are -- 23 are they prospective or they start July 1st? 24 MS. THOMPSON: Oh, you're referring to the 25 organizational clearance certificate claims with the 26 Board? 27 MR. LEONARD: Clearance with the Board. 28 MS. THOMPSON: The Board's forms once an OCC 32 1 holder has an organizational clearance certificate, they 2 are not required to file unless requested to do so. 3 So we would not send out any requests for 4 periodic claims this year. 5 MR. LEONARD: So our side of the clearance is a 6 one time clearance? 7 MS. THOMPSON: Yes. And then we do audit -- 8 review periodically -- 9 MR. LEONARD: And then audit -- we audit that 10 from time to time. 11 MS. THOMPSON: -- in order to ensure 12 compliance. MR. LEONARD: Okay. 13 And when -- when they do their first time 14 clearance it's February and it's for the upcoming tax 15 year? 16 MS. THOMPSON: How it works is the exemption 17 claims with the Assessors have to be filed by February 18 15th annually. An organizational clearance certificate 19 claim may be filed with us at any time during the year. 20 So -- 21 MR. LEONARD: For which year? Can it be 22 retroactive? 23 MS. THOMPSON: It -- it can be. They just have 24 to show that they had organization -- 25 MR. LEONARD: Okay. 26 MS. THOMPSON: -- organizational qualification 27 and operations prior to that year. 28 MR. LEONARD: Okay. Thank you. 33 1 MS. YEE: Okay. Very well. 2 Again, thank you for the speakers. We look 3 forward to working with you and we definitely welcome 4 your participation. 5 So we will be on a little bit of a tight time 6 line, but we want to allow you the additional time 7 before we notice the first interested parties meeting to 8 allow you to gather more input from your members and we 9 look forward to having this issue back in April. 10 MR. BOLDEN: Thank you. 11 MS. YEE: Thank you very much. 12 Thank you, Members. 13 MR. LEONARD: You want a motion and a -- 14 MS. YEE: Sure. 15 MR. LEONARD: I'll second your motion. 16 MS. YEE: Okay. I will move that this matter 17 be deferred -- or actually be referred to an interested 18 parties process for further input by the industry and by 19 proponents to further refine the form, identify 20 potential concerns, and to address them around issues of 21 duplication and availability of data, and to have this 22 matter returned to our April agenda. 23 Second? 24 MR. LEONARD: Second. 25 MS. YEE: There's a second. 26 MS. MANDEL: It's a long way of saying 27 supporting the concept, I think, so -- 28 MS. YEE: Yes, okay. 34 1 Without objection, Such will be the order. 2 Thank you. 3 MR. GAU: Thank you. 4 ---oOo--- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 35 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 January 22, 2009 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 35 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: February 10, 2009. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 36