Lawmakers tell rural hospitals aid should not go to consultants

Jim Kelly, a consultant, attended the kickoff meeting for a task force aimed at helping rural hospitals Tuesday at the Capitol. Rural hospitals have struggled and closed in droves over the past decade, and Georgia lawmakers thought they’d found a way to help keep many of them afloat this year: $180 million in tax credits that would be given to individuals and corporations who donate to small-town medical centers. But millions of dollars in consulting fees may wind up being siphoned away from those hospitals because of a deal between the powerful hospital lobby and a company that plans to charge 6 percent of the donations they receive to “help” hospitals get the money. The company is run by the same people who head the largest private school scholarship tax credit program in the state. They have been political backers of Gov. Nathan Deal and especially Lt. Gov. Casey Cagle, a likely candidate for governor in 2018 who is touting the hospital tax credits. While the hospital lobby is pushing the deal, leading state lawmakers, including the sponsor of the tax credit bill, are getting the word out that there’s no need for hospitals to use the consulting firm and pay fees to get the donations. BOB ANDRES /BANDRES@AJC.COM

Credit: Bob Andres

Credit: Bob Andres

Jim Kelly, a consultant, attended the kickoff meeting for a task force aimed at helping rural hospitals Tuesday at the Capitol. Rural hospitals have struggled and closed in droves over the past decade, and Georgia lawmakers thought they’d found a way to help keep many of them afloat this year: $180 million in tax credits that would be given to individuals and corporations who donate to small-town medical centers. But millions of dollars in consulting fees may wind up being siphoned away from those hospitals because of a deal between the powerful hospital lobby and a company that plans to charge 6 percent of the donations they receive to “help” hospitals get the money. The company is run by the same people who head the largest private school scholarship tax credit program in the state. They have been political backers of Gov. Nathan Deal and especially Lt. Gov. Casey Cagle, a likely candidate for governor in 2018 who is touting the hospital tax credits. While the hospital lobby is pushing the deal, leading state lawmakers, including the sponsor of the tax credit bill, are getting the word out that there’s no need for hospitals to use the consulting firm and pay fees to get the donations. BOB ANDRES /BANDRES@AJC.COM

Lawmakers thought they’d found a way to help keep struggling rural hospitals in Georgia afloat: $180 million in state tax credits going to donors who contribute to small-town medical centers.

The idea was to give Georgians and companies a tax break as an incentive to donate to their local small-town hospital.

But now some top lawmakers fear hundreds of thousands, if not millions, of those dollars could be unnecessarily siphoned away from modernizing emergency rooms and updating technology to pay for consultants, who plan to charge rural medical centers to market themselves and administer the program.

They are telling rural hospitals they don’t need to sign up with consultants, one of whom is being promoted by two political powerhouses at the Capitol, the state hospital lobby and the Georgia Chamber of Commerce.

"That was never our intention at all," said House Appropriations Chairman Terry England, R-Auburn. "He (the consultant) is taking 6 percent off the top of everything that we expected to go to rural hospitals. That's defeating the purpose."

The Georgia Hospital Association and the consultant it has endorsed say many small hospitals simply don’t have the staff or expertise to market a fundraising campaign and do the paperwork needed to comply with the tax credit program.

“Perhaps the criticism with the use of a charitable consultant stems from a lack of experience in the administration of a large-scale tax credit program with DOR (Department of Revenue) requirements,” said Jim Kelly, the GHA-backed consultant who also founded the state’s largest tax credit-supported private school scholarship organization, Georgia GOAL.

“We are doing the same thing Georgia GOAL does for private schools,” Kelly said.

So far at least 12 of the nearly 50 rural hospitals eligible to receive tax credit donations have signed up with Kelly’s Georgia HEART Hospital Program, and more are considering it.

The GHA has pushed Kelly’s Georgia HEART on its website and sent out a note to hospital officials attending the recent annual summer meeting of the Center for Rural Health in St. Simons Island touting the consultant’s program and letting them know he would be available for “no obligation” individual meetings with them. Kelly has traveled across rural Georgia talking to small-town hospital officials, letting them know what services his program could provide.

But top lawmakers involved in the effort say there is minimal paperwork involved and hospitals shouldn’t need extra staff or consultants to attract and collect the donations.

"The program was designed so that all of the money would be used to support the hospitals with very little administrative effort required," said state Rep. Jay Powell, R-Camilla, the chairman of the House Ways & Means Committee, which handles tax legislation. "There should be no need for any hospital to have to hire personnel or contract with outside consultants in order to take advantage of this program."

Many rural hospitals have struggled for years. Since 2013, at least five small-town hospitals in Georgia have closed, according to Georgia Health News, an online site that reports on state health care issues.

Lawmakers have long debated what to do about the problem. The lack of medical options threaten not only the health of small-town Georgians, but their economies as well, since businesses may be reluctant to move or expand in areas without adequate facilities.

“We all face the exact same problems,” said Kim Gilman, who runs Phoebe Worth Hospital in Sylvester and Southwest Georgia Regional Medical Center in Cuthbert.

The patient mix skews older and sicker at her hospitals than in, say, much of metro Atlanta. Facilities are often old as well: Gilman said Southwest Georgia Regional Medical Center is 69 years old. Because many of the hospitals are located in areas with high concentrations of low-income Georgians, they provide a lot of “uncompensated care.” They also have a large population of residents on government health care programs such as Medicaid that officials often complain reimburse them too little for services.

When nearby hospitals close, as they have in Gilman’s region, other medical centers have to pick up the slack.

“We know we cannot be everything to everybody, but we also know we must be exceptional at the services we provide to our community,” she said.

Some health care advocates hoped the state would expand Medicaid under the Affordable Care Act and that the extra federal money — which has been projected at up to $3 billion — would help prop up rural hospital finances. But Gov. Nathan Deal and Republicans leaders have for years said such an expansion would be too expensive for the state.

State Rep. Geoff Duncan, R-Cumming, said he came up with the tax credit idea while sitting in church last October.

Under Senate Bill 258, as approved by the General Assembly, individuals and corporations get tax credits for contributing to rural hospitals qualified by the state to receive the donations.

A tax credit directly reduces the taxes someone owes. Under the bill, individuals can get a tax credit worth up to 70 percent of what they donate to a rural hospital, or $2,500, whichever is less. Corporations can get a tax credit worth up to 70 percent of their contribution, or up to 75 percent of their income tax liability.

Qualified hospitals could get up to $4 million in tax credit-eligible donations. The credits will be awarded on a first-come, first-served basis. The state is allocating $50 million for the tax credits next year, $60 million in 2018 and $70 million in 2019.

Once the $50 million limit is reached next year, no more tax credit money would be available until 2018.

Such tax credit programs can be extremely popular with potential donors. The cap for the private school scholarship tax credit was met on Jan. 1 the past few years — the first day it could be filed for — because so many people and businesses applied.

Last week, Lt. Gov. Casey Cagle held a statehouse event to tout the hospital tax credits and a task force looking at ways to help prop up the finances of rural hospitals, and officials from small-town health care facilities in attendance praised the General Assembly for offering them the financial help.

The task force is made up of politicians and business leaders, Cagle said, “who will be promoting the tax credit. The awareness component is very, very important.”

While Powell said hospitals don’t need to hire consultants to get the money, that is exactly what some of them are doing. And the state hospital association doesn’t necessarily think that’s a bad idea.

“It is 100 percent correct that no hospital needs to or must use a consultant, just as no taxpayer is required to use an accountant or CPA to submit their tax returns,” said Earl Rogers, the GHA’s president and CEO.

“However, for those hospitals that perhaps don’t have the resources to devote to fundraising and ensuring compliance with the reporting requirements, the use of a third-party vendor may be helpful,” he added. “It’s a matter that each individual must carefully weigh and decide for themselves.”

According to Georgia HEART’s website, the group’s staff and most of the board of directors work for or serve on the board of Georgia GOAL.

Kelly has been an important player in the success of that program, which provides $58 million in tax credits each year to Georgians and companies who donate to “scholarship organizations,” such as GOAL. The organizations and schools promote the tax credits and urge parents and companies to donate. The donated money is used to provide scholarships for thousands of students to attend private schools.

The program, created in 2008, was criticized because lawmakers wrote the scholarship program legislation so that taxpayers got little information about how the money was spent. Kelly's group was one of the scholarship organizations that advocated for more transparency. The state was sued over the program in 2014, and the case is currently before the Georgia Supreme Court.

Kelly’s wife, Lisa, has long served as president of Georgia GOAL, and he has lobbied for years to promote and increase funding for the scholarship program.

Kelly said a few lawmakers encouraged his company to help rural hospitals after GOAL’s success attracting donors. GOAL works with more than 130 private schools to help them get scholarship money, and he said that the hospital tax credit program raises similar administrative issues.

Kelly said his organization will help with marketing and administering the program, with an online portal to provide hospital officials information, paperless processing for contributors, reporting to state agencies, and meetings to discuss strategy.

The consultant will charge hospitals 6 percent of what they receive in contributions, which is about the same as GOAL receives for administration.

That could amount to hundreds of thousands of dollars, if not millions, over the next three years if a large number of hospitals hire Georgia HEART.

Gilman said she hasn’t signed a contract with a consultant to handle the tax credit program, which she calls a “lifeline” for her hospitals. “We are looking at it … mainly because of the demands that are on it in terms of record-keeping and those kind of things,” she said.

State Sen. Dean Burke, R-Bainbridge, a member of a new task force on rural health care, said some hospitals may need the help.

“I think it’s important that hospitals make those business decisions for themselves,” Burke said. “If they have the expertise to do this in-house, then by all means they could save the 6 percent. If their hospital has absolutely no infrastructure for accepting gifts or going out and raising funds, they may need some help.”

Jimmy Lewis, the CEO of Hometown Health, a coalition of rural hospitals, said hospitals are being pressured to sign up with Georgia HEART before they even understand the mechanics of the program. Plus, he said, the tax credits may be so popular, particularly with the publicity generated by Cagle’s task force and lawmakers touting the plan, that they don’t need to hire a marketer.

“If this has real value like we think it does, there are going to be people coming out of the woodwork,” he said. “Why would you pay 6 percent on a marketing program when people may line up to donate?”

Lewis said any administrative issues could be handled by the Department of Community Health’s Office of Rural Health using state funds to help hospitals deal with the paperwork issues.

Some leading lawmakers are unhappy because they thought that they deliberately made it easy for hospitals to use all the tax credit money to make improvements and boost their bottom lines.

Senate Appropriations Chairman Jack Hill, R-Reidsville, first raised the issue in his weekly newsletter in August.

“This process is not complicated,” he wrote. “There is no reason for any hospital, individual or business to contract with or hire a third-party vendor to receive the benefits of this tax credit.”

England said since the tax credits could be competitive, hospitals will be vying to get a piece of the limited amount of money allocated by lawmakers — and they could wind up having to pay consultants such as Kelly more to ensure they get corporate donations.

He is also concerned that consultants will try to hit the tax credit limit by raising money from a few big companies to use up the cap.

England is hoping local businesses and individuals have the opportunity to benefit from the tax credits and donate to local hospitals. “When that happens, that industry is saying, ‘We are going to make an investment in that local hospital,’ ” he said. “It becomes an unseen benefit because they have skin in the game to make sure that hospital stays viable.”