May 31, 2009
A Message from James J. Mongan, MD, President and CEO
Dear Colleagues:
This morning you may have read a story in The Boston Globe that makes claims about Massachusetts’ hospitals contributions to the community, and the value of their tax exempt status. This morning’s coverage also raises questions about board conflicts.
The story implies that Partners is not doing its fair share in serving the community. In fact, Partners provides care to all regardless of ability to pay and, along with other non-profit hospitals and universities, generates jobs, supports life-saving research and helps drive the economy as the region’s largest employer.
This morning’s stories are misleading because they fail to put important facts in proper context and leave the public with misconceptions about our organization. We ask that you consider the following:
1. Tax exempt status is based on more than community benefit
The Globe raises the often-debated policy issue of the tax exempt status of Partners and other hospitals. It asserts that the benefit Partners HealthCare receives from being a tax exempt organization exceeds what we give back to the community.
Universities, museums and other non-profits receive tax exemption without any requirement for quantifiable community benefit. Not so for hospitals. Like all non-profit teaching hospitals, our tax exempt status is based upon four elements of our charitable mission: providing health care regardless of a patient’s ability to pay; educating the next generation of caregivers; supporting research into the understanding and treatment of disease; and working with the community to make measurable, sustainable improvements in the health status of underserved populations through programs commonly known as “community benefits.”
That being said, let’s take a look at the facts. The Globe’s own analysis estimates the value of our tax exempt status at $271 million. We disagree and believe the figure would be significantly lower. Even if we accept The Globe’s number, however, our community contributions are at least $442 million.
2. Partners community contributions outweigh value of its tax exemption
As stated above, The Globe asserts that if Partners paid taxes, we would have paid $271 million in FY07. The Globe compares that amount to the $151 million in direct community benefit and free care Partners reported according to the Attorney General’s guidelines that year. (For examples of additional community support click here.)
When counted using new IRS reporting standards, Partners contributions total $442 million because the IRS not only includes, but requires, the inclusion of financial losses from means-tested government programs (Medicaid), subsidies for graduate medical education, and subsidies for research. Partners’ efforts in these areas represent a community contribution which is more than one and one half times that of the financial benefit The Globe says we receive as a tax exempt organization. This $442 million is comprised of:
- Direct community benefit spending support for 21 community health centers, and programs to prevent domestic violence, combat substance abuse among young people, and address health care disparities ($151 million);
- The subsidy we provide to support research that enables medical advances; and the subsidy we provide to support training the next generation of physicians, nurses, and other caregivers ($143 million);
- Losses on Medicaid for low income patients where the State pays only 71 cents for each dollar’s worth of care we provide. This means Partners absorbs 29% of the cost of care to Medicaid patients ($147 million).
If Partners were to include losses from Medicare (where we are paid only 79 cents on the cost dollar) we would add another $330 million to our community contribution, bringing the total (with bad debt) in FY07 to $817 million – three times the value that The Globe places on our tax exemption.
Finally, Partners Payment In Lieu of Taxes (PILOT) to the City of Boston totaled $3.6 M in 2007 – more than 80% of the total payments made by all Boston medical institutions. In comparison, there are other Boston hospitals that paid less than $200,000 in PILOT.
3. IRS and AG policies were followed
The Globe suggests that Mr. Connors should not have had any business relationships with other healthcare companies. Neither the state Attorney General nor the IRS prohibit not-for-profit hospitals and health systems like Partners from having trustees who are business, legal, education, financial and healthcare executives on their board. Trustees of major hospitals and health systems in Boston and around the country include members drawn from these areas. We would lose a valuable source of expertise and experience if The Globe’s viewpoint were applied.
This morning’s story focused on Mr. Connors’ ownership of M/C Communications (a Harvard Medical School-affiliated educational program established two years prior to Mr. Connors’ appointment as Partners’ Chair) and Dovetail Health (a company that provides continuing care for patients with complex medical needs after they leave the hospital).
The story does not make clear for the reader that there is no contract between Partners and M/C Communications. Therefore, there was no public disclosure requirement. The story suggests that there is some type of exclusive relationship between M/C and Harvard Medical School. However, the fact is that M/C also had relationships with six other prestigious medical schools around the country and held conferences in more than 60 cities. The story also fails to mention that Dovetail Health and Mr. Connors’ involvement were discussed at a Partners board meeting in September of 2005. This information was provided to The Globe, but not used in the story.
4. Partners conflict of interest policy was followed
The Globe states that Mr. Connors has the ‘ultimate authority’ over disclosure issues. This is false. Partners Office of General Counsel is responsible for board conflicts oversight. In the case of Mr. Connors, the business relationship in question was properly dealt with because there was no contract between M/C and Partners.
Partners, whose board members serve on a volunteer basis, has been open about these issues, submitting more than 100 public documents in connection with its federal and state tax filings. These forms, called IRS 990 (federal) and Massachusetts Form PC (state) are easily accessible and in the public domain.
Conclusion
On a personal note, I would like to add that Partners is particularly fortunate to have had Jack Connors as our Board chair – and champion – over the past several years. Jack has worked tirelessly on behalf of Partners hospitals, physicians, nurses, and, most importantly, patients. His passion for health care is not limited to Partners. His record of support for organizations that serve the most vulnerable citizens is unparalleled. Boston Health Care for the Homeless, the Pine Street Inn, the Massachusetts Association for Mental Health, Partners in Health in Haiti have all benefited from Jack’s vision and passion. Ironically, just last week he was honored with the Greater Boston Chamber of Commerce’s Centennial Award for his leadership and distinguished contributions to our community. Without question, his generosity has touched many and made our city a better place to live.
This is the fourth article in a series which has made several assertions about Partners hospitals which are not supported by facts. During this process we have kept you informed of the many issues involved.
- The Globe has asserted that a “Partners Effect” is driving up health care costs disproportionately in Massachusetts. Facts show that family insurance premium costs are rising no faster here than in other areas of the country.
- The Globe asserted that Partners efforts to bring care closer to patients in suburban communities is harming community hospitals. State data shows that community hospitals’ share of admissions has been stable from 2000 to 2008.
- The Globe talked about a “secret handshake” giving preferential treatment to Blue Cross is 2000. In fact, Harvard Pilgrim received a better deal than Blue Cross to assist the company in recovering from receivership.
- The Globe highlighted pricing differences between community hospitals and teaching hospitals. In fact in all major cities, there are significant price differentials among hospitals, with most of the difference reflecting the higher cost of stand by services such as burn units, and under reimbursed services such as mental health.
- And as described above, The Globe misstated the relationship between tax exemption and community benefit
To review our comments concerning The Globe’s previous pieces or for more information on our community benefit programs, visit www.partners.org.
We deeply value the important work that goes on every day in our institutions to provide outstanding and nationally recognized patient care, to teach the next generation of physicians and caregivers, to develop research breakthroughs in the understanding and treatment of disease, and to improve the health of our most vulnerable citizens here and around the world. Thank you for being an important part of that worthy mission.
Sincerely,
James J. Mongan, MD
President and CEO
Partners HealthCare System, Inc.
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