Hospitals use tax credit donations as Band-Aid
But health care officials say the state’s program needs improvement
Jonathon Green said a tax credit program intended to help Georgia’s struggling rural health care system delivered $500,000 in donations in 2022 to his Taylor Regional Hospital, money he used to upgrade imaging machines and other technology.
Green, CEO of Taylor Health Group, said he could put more donated dollars to good use, but it is great that the tax credit “provides a dollar-for-dollar impact” that benefits both hospitals and taxpayers.
“You hear a lot of times people want to control what their tax dollars do. This is one of very few things that you can specifically earmark what your state tax dollars do. You know where it goes. You see the impact of it. It’s specific. I think people need to understand that,” Green said.
It has been six years since state lawmakers passed the Rural Health Tax Credit, and while an overwhelming number of hospitals participating in the program report seeing a significant benefit from taxpayer donations of up to $4 million, a recent report by the Georgia Department of Audits and Accounts’ found that many of the neediest hospitals are still getting the smallest bulk of those dollars.
Each year, the Georgia Department of Community Health determines which rural hospitals qualify for the program, ranking them based on need.
In the 2022 ranking, St. Mary’s Sacred Heart Hospital in Franklin County was in the No. 1 spot as the hospital with the most financial need out of 55 rural hospitals in line for donations. Navicent Health in Baldwin County, Dorminy Medical Center in Ben Hill County, Irwin County Hospital and Candler County Hospital filled out the other top five slots.
“In 2022, 22 of the 55 eligible hospitals received more than $1 million in contributions, and 22 received less than $500,000. Most contributions were directed by donors and not necessarily to the neediest hospitals” as designated by the Department of Community Health, according to the auditor’s report. “Five of the 10 neediest received less than the average collections per hospital of $1,067,862.”
Taylor Regional Hospital ranks 15th on the list, with about $500,000 in tax credit donations in 2022.
“We boosted our diagnostics significantly. We’ve added new radiology equipment. We’ve added MRIs, and we’re able to keep up leases on those types of equipment to give us the ability to continue to provide those services,” Green said. “So I would just say an increase, from a technology standpoint, is what’s had the most impact from the tax credit.”
The program’s reach expands beyond rural communities, Green said, also providing a benefit to those living in Georgia’s more populated communities.
“I know living in the Greater Atlanta area, that rural hospitals sometimes are not on their minds. But if rural hospitals start to close, then you’re going to see an impact on the urban and metro hospitals,” Green said.
“That is the impact, and that’s what people need to think about. If these hospitals close, where are these people that would typically go to this hospital gonna go, they’re going to go there,” Green continued. “Then you’re gonna get really long wait times in the ERs, you’re gonna have long wait times to see physicians.”
RURAL HOSPITAL TAX CREDIT EMBRACED SLOWLY
It took a while for the program to gain traction after state lawmakers approved it in 2017, but changes were made to the program over the years that made it more appealing to taxpayers. Most of that interest hinges on a dollar-for-dollar tax break for individuals and companies.
In the past two years, the number of taxpayer credits hospitals claimed nearly reached the annual $60 million cap. The total was $42.9 million in tax year 2021, of which individual taxpayers accounted for nearly 90% of that.
And in 2022, taxpayers donated $58.7 million to eligible rural hospitals with contributions ranging from $67,000 to $3.99 million.
Most of the donations are managed by the Georgia Heart Hospital Program, a nonprofit that markets the credit to taxpayers and processes preapproval requests and contributions.
Georgia Heart charges a 3% administrative fee, which is about $1.78 million in fee revenue that comes out of donor funds. That is a cut from the 6% fee originally planned.
In the firm’s 2022 annual report on the program, hospitals used the funds to increase the quality of patient care, make facility renovations and invest in better equipment such as updated MRI and mammography machines.
The third-party firm fell under scrutiny during the legislative process when lawmakers first debated the tax credit program, but now most rural hospitals find it much easier to work with Georgia Heart. But the state audit still raises questions about the effectiveness of the program and calls for increased efforts to ensure hospitals are reporting accurate information about how much money is being raised and how the funding is used.
HomeTown Health is a network of rural hospitals that advocates for accessible health care in communities facing the constant threat of a hospital closure and works closely with hospitals that participate in the program.
Jimmy Lewis, CEO of HomeTown Health, said the tax credit program is a vital resource for rural hospitals and believes the audit “has all the makings of a good study” as it details hospitals’ financial needs within the marketplace and what improvements lawmakers should consider making to the program in the future.
The workforce shortage is so great, and raising money requires such specific skills, so most hospital CEOs opt to use Georgia Heart despite the cost to participate.
“If I’m a rural hospital CEO and I’m struggling on a daily basis to make payroll, and the opportunity comes along for me to pick up 1 or 2 million dollars, if I already don’t have sufficient skill sets to get cash coming in, but I have an opportunity with Georgia Heart to pay 3% and begin collecting, I’m foolish not to use the Georgia Heart program,” Lewis said.
INEQUITY IN FUNDING
But despite increasing donor support through Georgia Heart, state auditors determined the program is still not reaching the neediest hospitals.
Case in point, Colquitt Regional Medical Center, which ranked as Georgia’s 42nd neediest rural hospital, received nearly $4 million from the tax credit program — the highest amount hospitals are allowed to get.
Meanwhile, Navicent Health in Baldwin county received around $600,000, and it was ranked number two in need.
“The tax credit has been a lifeline for many rural hospitals across the state that face financial pressures that larger health systems were not subject to, even prior to the pandemic,” said Chris Denson, director of policy and research for the Georgia Public Policy Foundation, a conservative public policy think tank based in Atlanta.
“So, a combination of the rural hospitals tax credit before the pandemic has helped ensure their survival,” Denson said. “But, of course, these hospitals also received federal funds, pandemic relief as well, that was a direct cash flow to help keep them afloat.”
At least nine hospitals have closed in rural Georgia over the past decade, with Patterson Hospital at the Southwest Georgia Regional Medical Center in Randolph County becoming the latest to close in 2020. And although the pandemic stimulus checks have helped stave off even more rural hospital closures, many still remain in a financial limbo.
“The hospitals that we are dealing with now have worked through their cash situation with the pandemic money,” Lewis said. “And now we’re coming to a summer where cash is desperately short in many cases.”
The audit’s findings raise further questions within Georgia’s rural health care system about how eligibility is determined when filtering for the most destitute hospitals.
“It’s important to understand that this tax credit is an effort by the state to strengthen needy rural hospitals,” Lewis said. “And as a result of that, there has to be good auditory function in order to see where the money comes from and how it is spent.”
While the dollars pumped into hospitals through the tax credit have been great for hospitals, the audit highlights some cracks within the program that need to be filled, Lewis said.
“This program is a great program. We just have to figure out how to refine this program and make it more effective so that these hospitals have certainty to do the things they need to do,” Lewis said. “I can’t say that we’ve got a single hospital that’s going to close today. But we have a number of rural hospitals that are cash desperate as we go into the fall.”
Danny Kanso, senior fiscal analyst at the left-leaning Georgia Budget and Policy Institute, agrees with state auditors that lawmakers should work to improve the program. And, he said, the state’s health care system would be better served if Georgia lawmakers expanded access to Medicaid coverage through the Affordable Care Act.
“For most eligible hospitals, the benefits of this program are simply too small to approach the huge level of need experienced in Georgia’s rural communities,” Kanso said. “Rather than scratching at the surface of addressing massive levels of uncompensated care, the state would be better served by utilizing available resources to extend health coverage directly to Georgians through Medicaid expansion.
“By redirecting these funds to cover the costs of full Medicaid expansion, every dollar the state expends on its rural hospital tax credit could be multiplied by a factor of nine while also giving more than half a million Georgians the many benefits of health coverage,” he said.
STILL SOME KINKS TO WORK OUT
Though many hospitals report the program helped their facility survive significant cuts, there are still some kinks to work out, according to the executive vice president of external communications for the Georgia Hospital Association, Anna Adams.
“I was just at a conference with one of our members who was talking about how vital the program is to her facility in particular,” Adams said. “And many of our rural hospitals, I think, are in the same boat with her in saying that any kind of development or growth or updating facility structure like that comes from the donations that they get through the rural hospital tax credit program.”
Lewis, who participates in listening tours with many CEOs of rural hospitals, said there are some possible solutions that could lessen the program’s inequities.
One solution could be to narrow the eligibility to hospitals that serve a population of 30,000 or less, instead of ones in communities of 50,000 people. Hospitals serving these slightly larger population centers need help, too, Lewis said. But many of those facilities are backed financially by larger hospitals, when the focus should be on hospitals without that backing.
“The interesting thing is as we look at hospitals, there are a number of big hospitals that are owned by large hospitals or larger hospitals, and is that not some kind of contradiction … to have a lot of money and then say you need money,” Lewis said.
And, he said, the state agency administering the program can create a more level playing field when determining need by gathering more input from Georgia’s health care professionals.
“Hospitals have never been consulted as to how the algorithm works and how the methodology works,” Lewis said. “If you want to have a really good effective program for the distribution of money, that ought to be put together with an advisory group of rural hospitals who know how to define neediest.”
But even with lingering questions about funding equity, supporters say the tax credit has had a positive effect on rural hospitals and provides a benefit to the communities that stand to lose access to the critical care they need.
Ben Saylor, vice president of operations for Georgia Heart, defended the program’s existing rules aimed at spreading the benefit across the state.
“The tax credit contributions are keeping hospital doors open,” Saylor said. “This tax credit program is also helping to bridge the rural-urban divide by enabling Georgia taxpayers (both individuals and businesses) to address the essential need to improve health care in our small towns.
“Each hospital that receives tax credit contributions is deemed a hospital in need per the definitions in the statute under which the program operates. Otherwise, it would not qualify to participate in the program,” Saylor said. “We believe the caps on what each hospital can raise and the individual tax credit limits at different points during the year create an opportunity for each rural hospital to achieve success in raising funds through this program.”