Memorial Hermann and other Nonprofit Hospitals Aren't Into BBB Charity Audits

Since 2003 the Houston branch of the Better Business Bureau has been requesting that certain Houston nonprofit hospital systems including Memorial Hermann Healthcare System — the largest nonprofit hospital system in Houston – undergo a free BBB philanthropy audit. Maybe it shouldn't come as a shock that most hospital officials, including those at Memorial Hermann, haven't exactly been rushing to get these audits done. 

According to the BBB, officials with most of Houston's nonprofit hospital systems have declined to undergo the BBB's free philanthropy audit for the past few years. “It's a free program and we do all of the evaluations and work with them and meet with them whenever it works for them,” Ashley Ordaz, BBB's coordinator of philanthropy review, says. “Some nonprofits view us as the bad guys, but I'm working to show that we're just trying to teach how important it is for them to be transparent organizations.”

For the past 45 years, the Houston branch of the Better Business Bureau has been auditing charities and nonprofits in Houston, Galveston and South Texas. The number of nonprofit organizations has been growing like crazy in the past few decades, so the BBB charity auditors can only audit a select few of the nonprofits and charities in the area. Because of this, Ordaz says, they pick nonprofits and charities that have garnered their attention either because of the size of the organization, the amount of advertisements, customer complaints filed with the BBB and any news stories (like our story from last week, “Crippling Debt,” for example). Then the BBB invites the organization in question to submit information and documentation for the BBB's Philanthropy Review Program. 

Under the national standards nonprofits qualify to become a BBB Accredited Charity if the organization has met all of the BBB's 20 standards for charity accountability. Some organization representatives have chosen to undergo the audit, submitting IRS forms, 990 forms, board minutes, conflict-of-interest disclosures, clearing up all complaints filed with the BBB and meeting a flurry of requirements to get BBB charity accreditation. Even when the BBB requests a nonprofit to undergo an audit the review isn't actually required by law or anything. However, not doing it and declining to put information out that would help ensure a nonprofit is being fully transparent doesn't exactly look good, Ordaz says.

This brings us to Houston's nonprofit hospitals. While officials with the Texas Medical Center — the nonprofit entity that governs parking, maintenance, leasing, security and food services in the Texas Medical Center – have submitted to annual audits since 2003 and has passed with flying colors each year, the records are more dodgy for the nonprofit hospital systems.

In some cases, as with Houston Methodist Health System, the BBB has never asked to conduct this type of audit for the actual hospital, even though the BBB has asked the hospital's foundation to submit to an audit.  Houston Methodist has 16 complaints filed in the last three years with the BBB (14 of the 16 are billing complaints and two are over services) but the hospital system generally hasn't attracted BBB attention, Ordaz says. Houston Methodist spokeswoman Stephanie Asin sounded dubious about the whole thing. “We've never been asked, and we give away more charity care each year than the state even requires to be a nonprofit,” she says. “I don't know why we'd even be involved in an audit like that since it's not something required by the government.”

Asin later gave us a more formal take on the question of the BBB audit.  "The BBB is a great organization and has great value to our community, but we don’t see this rating of our foundation as applicable so we declined to complete the application. Our foundation is part of a trusted, well-respected organization, and is audited by an independent auditor annually," she stated, noting that they have never had a donor refuse to give money because they don't participate in the BBB audit. 

In other cases, BBB officials have put in their requests but the hospital system reps either haven't been able to meet the requirements or they just haven't ever handed over all of the information needed to complete the audit. “Sometimes they don't want to provide the information we want, and we kind of think that they're hiding something, but a lot of times it's just that they have people wearing a lot of hats and they don't have time to do something they aren't required to do,” Ordaz says.

Meanwhile, Texas Children's Hospital has been asked to participate in the audit since 2003. Texas Children's Hospital participated until 2007. The hospital system successfully became charity accredited in 2014 but the accreditation expired this year. Texas Children's officials have not filed the information required for the audits this year. Texas Children's has had six complaints filed with the BBB over collections issues in the past three years, but they've dealt with all of them and it's unclear why they've declined to finish applying for the BBB charity accreditation, Ordaz says. “They did express interest earlier this year, however, [they] declined to participate after consideration. We do not know why they have not participated since 2007,” Ordaz says.

Texas Children's spokeswoman Jenn Jacome says they decided the BBB charity audit — which is often used by potential donors to evaluate organizations for potential donations — wasn't serving that function for the hospital system.  "We have found that donors who give to Texas Children’s find us through other avenues. The BBB is a great resource for so many things, but it has not been our experience that donors are using this organization to learn about our mission or giving opportunities at Texas Children’s," Jacome says.

Memorial Hermann Healthcare System is the largest nonprofit hospital system in Houston. Between the size of the nonprofit, 44 customer complaints — mostly about billing — filed in the last three years, stories on the hospital and its extensive advertising, Memorial Hermann has been on the BBB charity audit wish list for years, Ordaz says. BBB officials have been asking Memorial Hermann to participate in the charity audits since the national standards were put in place in 2003, but Memorial Hermann never completed an audit. They got close in 2012 when Memorial Hermann officials submitted all of the required information, but the hospital system failed to meet at least one of the 20 criteria.

This year Memorial Hermann officials have once again been asked to undergo a charity audit and this time they've said they'll do it. However, they only submitted the IRS information and 990 form, Ordaz says. Memorial Hermann will also have to take care of two customer complaints filed against the hospital. (One is over a billing mistake and one focused on how the patient was charged at a premium for hospital services, even though he didn't have insurance, according to the BBB reports.) Memorial Hermann officials have until July to get these complaints resolved and finish submitting the other required information.  "The deadline to submit the information to the BBB has not expired. We have plans to submit our information as soon as possible," Memorial Hermann spokeswoman Alex Loessin says. 

Steve Hand, the head of government reporting at Memorial Hermann, was surprised to hear about the requested charity audit, but he says they plan on submitting all of the information required for the audit. “Yes, I'm sure we'll get it done,” he says. 
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Dianna Wray is a nationally award-winning journalist. Born and raised in Houston, she writes about everything from NASA to oil to horse races.
Contact: Dianna Wray