Proposed Statutory Language Virginia Nonprofit Healthcare Executive Compensation & Workforce Equity Act § 1. Short Title This Act shall be known and may be cited as the “Nonprofit Healthcare Executive Compensation and Workforce Equity Act.” § 2. Definitions For purposes of this chapter, unless the context clearly requires otherwise: 1. “Nonprofit hospital system” means any hospital, health system, or affiliated entity organized as a nonprofit corporation under Virginia law and exempt from federal income taxation under § 501(c)(3) of the Internal Revenue Code. 2. “Senior executive” means any individual employed by a nonprofit hospital system who serves as: o President o Chief Executive Officer o Chief Financial Officer o Chief Operating Officer o Chief Medical Officer o Chief Nursing Executive o Chief Legal Officer or General Counsel o Any other position designated as a key employee on IRS Form 990. 3. “Executive incentive compensation” means bonuses, incentive payments, performance awards, or other variable compensation in excess of base salary. 4. “Essential worker” means any employee of a nonprofit hospital system who provides direct patient care or operational support necessary for patient care, including but not limited to nurses, medical assistants, technicians, therapists, environmental services staff, food services staff, and support personnel. 5. “Cost-of-living adjustment (COLA)” means a system-wide wage increase designed to offset inflation and maintain employee purchasing power. 6. “Regional inflation benchmark” means the annual percentage change in the Consumer Price Index for the Washington–Arlington–Alexandria metropolitan area or other applicable regional CPI as determined by the U.S. Bureau of Labor Statistics. 7. “Small nonprofit hospital” means a nonprofit hospital system that: o Employs fewer than 500 full-time equivalent employees statewide, and o Has annual gross operating revenue of less than $250 million, and o Is not part of a multi-hospital or multi-state health system. 8. “Rural nonprofit hospital” means a nonprofit hospital located in a locality designated as rural pursuant to § 32.1-30 of the Code of Virginia or designated as a Critical Access Hospital under federal law. § 3. Executive Incentive Compensation Restrictions A. No nonprofit hospital system shall award or pay executive incentive compensation to any senior executive during a fiscal year in which the system fails to provide a system-wide cost-of-living adjustment to essential workers that meets or exceeds the applicable regional inflation benchmark. B. Executive incentive compensation may only be awarded if: 1. Essential workers receive a COLA equal to or greater than regional inflation for the same fiscal year; and 2. The nonprofit hospital system certifies compliance with this section pursuant to § 5 of this Act. C. Nothing in this section shall prohibit reasonable base salary compensation consistent with nonprofit standards, provided such compensation complies with existing state and federal law. D. Exemptions. The provisions of this section shall not apply to: 1. Small nonprofit hospitals as defined in § 2(7); 2. Rural nonprofit hospitals as defined in § 2(8); 3. Any nonprofit hospital system that demonstrates: o Documented financial distress, including operating losses exceeding 5 percent of annual revenue for two consecutive fiscal years; or o A declared public health emergency that materially impacts system solvency, as determined by the oversight authority. E. Exempt hospitals shall remain subject to transparency and reporting requirements under § 4, unless otherwise waived by the oversight authority. § 4. Transparency and Reporting Requirements A. Each nonprofit hospital system shall annually submit and publicly disclose a report containing: 1. Total compensation, including base salary and incentive compensation, for each senior executive; 2. The percentage and effective date of any COLA provided to essential workers; 3. The regional inflation benchmark used for COLA determinations; 4. A certification of compliance with § 3 of this Act. B. Reports shall be submitted to the designated oversight authority no later than six months following the close of the fiscal year. C. Small or rural nonprofit hospitals may submit abbreviated reports, provided that executive compensation totals and workforce wage data remain publicly accessible. § 5. Tax-Exempt Accountability A. Compliance with this Act shall be a condition of eligibility for any state-level tax exemptions, benefits, or preferential treatment granted to nonprofit hospital systems. B. A nonprofit hospital system found to be noncompliant may be subject to: 1. Suspension or revocation of applicable state tax benefits; 2. Civil penalties as determined by the oversight authority; 3. Mandatory corrective action plans. C. Nothing in this section shall be construed to revoke tax-exempt status solely due to temporary financial hardship, provided the nonprofit hospital demonstrates good-faith compliance efforts and submits a corrective action plan. II. Comparison Table Alignment with Existing Virginia Nonprofit Law Policy Area Existing Virginia Law Proposed Act Alignment / Enhancement Nonprofit Tax Exemption VA grants tax exemptions to nonprofit hospitals under §§ 58.1-3606 and 58.1-3650 based on charitable purpose Retains exemptions but conditions continued eligibility on workforce wage equity and transparency Executive Compensation Oversight Governed primarily by IRS “reasonable compensation” standards; limited state oversight Adds state-level standards tying executive bonuses to worker COLAs Public Reporting IRS Form 990 disclosure required federally; limited public awareness Requires state-level, easily accessible reporting on executive pay and worker wage increases Workforce Wage Protections No direct COLA or wage equity requirements for nonprofit hospital workers Establishes inflation-linked COLA as a prerequisite for executive bonuses Rural & Small Hospital Protections Various exemptions and grant programs exist to protect rural access Explicit exemptions to prevent unintended harm to rural and small hospitals State Oversight Authority Fragmented oversight across agencies Designates a single oversight body for enforcement and guidance Public Benefit Accountability “Community benefit” largely self-defined Creates measurable accountability linking tax benefits to worker compensation outcomes § 6. Oversight and Enforcement A. The Virginia Department of Health, or such other agency as designated by the Governor, shall: 1. Review annual compliance reports; 2. Conduct audits or investigations as necessary; 3. Enforce penalties for noncompliance; 4. Issue guidance to ensure uniform application of this Act. B. The oversight authority may promulgate regulations necessary to implement and enforce this chapter. § 7. Severability If any provision of this Act or its application to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act that can be given effect without the invalid provision or application. § 8. Effective Date This Act shall take effect on July 1 following enactment, and shall apply to fiscal years beginning on or after that date. III. Policy Framing for Legislators This proposal does NOT: • Cap base salaries • Eliminate executive compensation • Apply to small or rural hospitals • Override federal nonprofit standards This proposal DOES: • Protect essential healthcare workers • Preserve nonprofit tax integrity • Increase transparency • Align leadership incentives with workforce wellbeing Share a progress update, thank your supporters, or ask for help...