Thursday, February 21, 2008
Yesterday's New York Times includes an article regarding the proper measure of nonprofit charity care. According to the article, "the 1.9-million-member Service Employees International, argues that a Boston hospital, Beth Israel Deaconess Medical Center, violated [Sarbanes Oxley accounting] standards by including its losses from bad debts in its tally of the charity care it provides." Beth Israel is the teaching hospital for the very well endowed (indicating a measly $3.6 Billion endowment, no wonder uncollected bad debt is charity!) Harvard Medical School, by the way. SEIU acknowledges that Sarbanes Oxley does not literally apply to nonprofit hospitals but it still argues that counting uncollected hospital bad debt as "charity" care is misleading. The article quotes two prominent tax law professors, John Columbo (Illinois) and Jill Horwitz (Michigan) as confirming that Sarbox is generally inapplicable to nonprofit boards. Still, Horwitz seems to applaud the "creative" efforts SEIU is using to encourage further discussion by nonprofit hospital boards.
Massachusetts law, said Jill R. Horwitz, a law professor at the University of Michigan, does not require nonprofits’ directors to behave exactly like directors of for-profit companies, although it does require them to apply their knowledge in a general manner. Still, Professor Horwitz said, the union’s approach is “very aggressive, creative lawyering, and once they’ve sent the letter, I think the board members do have a duty to discuss the issues it raises with the executives of the hospital to make sure everything is in order.”