SEIU Attempts To Force Beth Israel Deaconess To Restate Charity Care Spending, Exclude Bad Debt From Total

The Service Employees International Union has said Beth Israel Deaconess Medical Center, a not-for-profit institution, incorrectly included bad debt in its accounting of what charity care it provided in 2005 and 2006 and should restate the value of charity care in those years, the New York Times reports.

SEIU Executive Vice President Mike Fadel said, "Clearly, the commingling of charity care and bad debt in the hospital's financial statements doesn't meet the plain English standards" of the Sarbanes-Oxley Act, which regulates accounting practices to deter fraud. However, the union acknowledged in its letter that Sarbanes-Oxley does not apply to not-for-profits.

In December 2007, the Internal Revenue Service released a new accounting form to be used by not-for-profits and said it does not consider bad debt a part of charity care. However, the decision is not retroactive, the Times reports.

The union said that Massachusetts law requires directors of not-for-profits who also work for corporations to "use the specialized knowledge they have from their position in the for-profit world" in operating not-for-profits. Six Beth Israel directors also sit on the boards of for-profit companies.

According to the union's research, Beth Israel included about $11 million of bad debt in its charity care spending for 2005. The hospital reported $67.6 million in charity care for 2005, and excluding the bad debt would reduce the total by about 16%.

SEIU, which does not represent any hospital workers at Beth Israel, "has issued reports critical of hospitals in a number of states as part of what it describes as a reform effort," the Times reports. Fadel said the letter is not part of any union organizing drive at Beth Israel.

Judy Glasser, a spokesperson for Beth Israel, said, "We follow all the reporting requirements of the uncompensated-care rules, and we've never been given any indication by any of the regulatory agencies we report to that anything is not according to the regulations." The hospital's directors did not respond to questions about the letter.

John Colombo, a law professor at the University of Illinois, said the union is "trying to imply a legal obligation that is based on a shaky interpretation of the law." Jill Horwitz, a law professor at the University of Michigan, added that Massachusetts law does not require not-for-profit companies' directors to behave exactly like directors of for-profit companies. However, she said that the law does require them to apply their knowledge in a general manner (Strom, New York Times, 2/20).