Charity Watch Dog Blasts Non-Profit Hospital's PR 'Spin Campaign'; Taxpayers Shouldn't Be Forced to Subsidize Effort to Mislead Public

11/15/2002

From: Mike Hardiman of Public Interest Watch, 202-431-1467

WASHINGTON, Nov. 15 -- Not-for-profit hospitals work hard to maintain public good will and justify the huge -- and some say undeserved -- tax breaks they enjoy on income, property and bond financing. But should tax-exempt money be used to fund a hospital's PR campaign to obscure its troubled financial position?

Public Interest Watch (PIW) today, in the interest of generating greater scrutiny into the worthiness of the tax-exempt status of the nation's not-for-profit hospital system, posted on its website a presentation from a Louisville hospital. The presentation reveals precisely how one not-for-profit hospital is using tax-exempt money to fund sophisticated public relations tactics as a means to divert media attention away from its financial situation. The presentation is on the PIW website at: http://www.publicinterestwatch.org/press.htm.

Called "When Big Business and Community Stewardship Collide," the presentation, given a month ago by a public relations executive from Louisville's Norton Healthcare, outlines the seven-hospital system's "need to appear financially stable" despite what it admits have been "consistent financial losses" and a "negative bottom-line for 5 straight years."

In the presentation, which was delivered at the Society for Healthcare Strategy & Market Development on September 26, a Norton Healthcare representative reveals that his employer had an "organizational culture" that consisted in part of "an air of non-disclosure, keep the checkbook confidential, no sense of a 'need to know,' and a distrust of management communications."

But Norton Healthcare decided to embark on a major public relations campaign, according to the 53-slide presentation, intended to among other things "re-frame the environment, give context to financial story and communicate other metrics of success (to) off-set emphasis on financials." Since the hospital apparently rejected any "draconian action to fix the bottom line," it endeavored instead to "move quickly to strike first."

A slide entitled "Communications Strategy" states in part that Norton Healthcare "couldn't afford to respond to inquiries" and decided to "frame the story and give it context." Also under "Communications Strategy" Norton Healthcare says its public relations efforts were designed to "take ammunition away from detractors," and so it embarked on a program that included "scripted phone calls to key physicians, elected officials, community leaders, donors" and faxes to physicians and advance packets sent to print media and other tactics.

As for results, Norton Hospital is apparently pleased that, according to the presentation, the local Louisville media paid "no subsequent attention to fiscal health." "The more we talked regularly about our financials, the less the (Louisville) Business page cares," the presentation claimed.

Years ago, America's not-for-profit hospitals won tax-exempt status because they were generally run by religious or philanthropic organizations to serve the poor. They were financed primarily by donations, provided a public benefit and generated little if any income. Today, more than 80 percent of U.S. hospitals are not-for-profit, but several are struggling financially and face even tougher times ahead.

But at least one study has suggested that between 20 to 80 percent of not-for-profit hospitals do not provide community benefit equal to the government's tax expenditure on them. According to the National Bureau of Economic Research, the tax revenues lost as a result of tax-deductible charitable contributions to non-profit hospitals exceed $1 billion a year. These tax breaks are not available to for-profit hospitals.

About Public Interest Watch

Public Interest Watch (PIW) was established to shine a spotlight on the activities and finances of nonprofit advocacy organizations, exposing specific instances of misconduct. PIW also plans to advocate for legislative reforms that would require improved financial disclosure by such groups.