Tax-exempt hospitals face growing scrutiny over their contributions to the community. Now, 15 years after the issue came to a head in New Haven, Connecticut, the city's flagship hospital has positioned itself as a leader in community service, Dan Diamond reports for Politico.

The controversy that triggered a turnaround

In 2003, the Wall Street Journal reported the story of a 77-year-old retiree who was paying off the cancer treatment his late wife had received at Yale New Haven Hospital. According to the Journal, the hospital sued the retiree, put a lien on his house, and seized most of his bank account.

The story brought particular controversy because, like other nonprofit hospitals, Yale received significant tax breaks. The man was among several residents whom the hospital had sued.

Yale New Haven Hospital's current CEO Marna Borgstrom, a former COO who took on the position after the leadership change, acknowledges the hospital had erred. In response, Yale changed its billing practices, forgave patient debt, and revamped its leadership.

Hospital leaders have argued that some of the scrutiny arose after unions tried to stir controversy to gain bargaining power. Borgstrom said, "There was a lot of hyperbole going on," but added, "There were no black hats and white hats."

Yale New Haven's story sparks a national conversation

The story drew nationwide attention to hospitals' nonprofit status, as well as their—and their organizations'—relationships with their communities.

Yale New Haven Hospital and Yale University occupy billions of dollars of tax-exempt property—and the tax dollars that they and other nonprofit institutions avoid paying are "sorely missed" by governments, Diamond writes. The Connecticut governor earlier this year went as far as to suggest allowing cities and towns to tax hospital property, although the proposal was abandoned amid significant opposition from hospitals.

But the issue is much bigger than Yale: Roughly 3,000 hospitals receive tax breaks, amounting to billions of dollars, according to Diamond. And hospitals throughout the country are facing criticism that their current contributions to the community don't justify their tax exemptions.

How Yale New Haven is seeking to give back

For Yale New Haven leaders, the clear lesson of their experience 15 years ago was that the hospital needed to do more to address community needs, even those that were not directly health care-related, according to Borgstrom.

One of Yale New Haven's first efforts involved work with Habitat for Humanity. Bill Casey, who runs the city's Habitat for Humanity program, said the hospital gives his organization "money, time, and property." Today, Yale New Haven sponsors the construction of two houses annually and directs 500 volunteers to the program, making it a top supporter of Habitat in the region, Diamond reports.

Yale New Haven has also invested in local education. The hospital in 2011 gave $2 million to New Haven Promise, a program that guarantees high school graduates will be eligible for a college scholarship if they meet certain basic requirements.

In addition, officials noted they've offered many smaller financial contributions. The hospital last year made 170 smaller contributions, such as $15,000 for an NAACP dinner and $500 for a boys' basketball team.

And in the health care space, Yale has helped fund Fair Haven Community Health Center, a clinic that provides care to uninsured and low-income residents.

Suzanne Lagarde, a Yale-trained gastroenterologist who left her private practice to run the center, said Yale has been integral to the center's success. She noted that the hospital has helped treat undocumented patients and strategized to develop a citywide safety net. She said, "If I didn't have them, my IT bills would be logarithmically larger than they are."

Yale has also sought to better publicize its community benefit, which consists of total spending on charity and local initiatives. As is the case with many hospitals, most of the hospital's community benefit comes in the form of Medicaid care, the cost of which isn't fully covered by reimbursements, according to the hospital.

Challenges remain

While Yale has invested in a range of community projects, community health challenges persist in the neighborhood around the facility, Diamond reports.

For example, about 15% of residents in the area around the hospital have diabetes, triple the rate around the university campus—and 41% are obese, about twice the campus rate.

In addition, physicians who treat local patients—who spoke to Diamond on the condition of anonymity—said the hospital is missing persistent problems, such as mental health concerns among residents in nearby parks.

Yale New Haven leaders reflect on the progress made

Still, Yale has made significant inroads on community health initiatives over the last decade and a half, Diamond reports.

For its efforts over the years, Yale in 2012 was runner-up for the American Hospital Association's community service award. Today, the hospital is seeking to be No. 1. "We must reach beyond the physical confines of our medical center and into the community," the hospital's latest application reads.

Looking back at the experience 15 years ago, Borgstrom said, "We learned a lot about ourselves."

Today, Yale New Haven is "focusing on education, on safe housing," Borgstrong noted. "It's just a no-brainer" (Diamond, Politico, 12/31/17).