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Seeking Stricter Regulations On Tax-Exempt Status For Not-for-Profit Hospitals

Armen Hareyan's picture

Not-for-Profit Hospitals

Sen. Chuck Grassley(R-Iowa) on Tuesday said he might seek stricter requirements on not-for-profithospitals' tax-exempt status if they continue to oppose efforts to increasetransparency of the community benefits they provide, the ContraCosta Timesreports. The Internal Revenue Service has proposed changing some taxforms, which would require hospitals to provide more detailed descriptionsabout their charity care and community benefits (Kleffman, Contra CostaTimes, 11/1). More than 100 hospitals filed comments opposing the changebecause they claim it would create an overly narrow definition of charity care,according to CQ HealthBeat.

The American Hospital Association also opposes the IRS policy, aswell as Grassley's efforts to increase transparency. Grassley at a meetingTuesday with experts and Senate Finance Committee staff discussed a draft version oflegislation that would require hospitals to allocate 5% of their annualoperating expenses to charity care before hospitals could qualify asnot-for-profit.

Under the draft bill, hospitals would be required to survey low-incomeresidents in their communities every three years to determine what health careneeds the hospitals should be fulfilling. Programs that would be consideredcharitable under the draft legislation include no-cost care for low-incomeresidents; an emergency department open to all residents regardless of theirability to pay; burn units; trauma centers; health profession education andtraining; and health research, along with other programs deemed necessary aftercommunity evaluations. In addition, hospitals would be prohibited from charginguninsured or underinsured patients more than the rate paid by Medicare orMedicaid or the actual cost to the hospital.

Grassley said he has not "made any decisions about whether legislation isnecessary," but he is concerned some hospitals would never adequately policethemselves or revise their charity care standards unless forced to do so byCongress (Lubbes, CQ HealthBeat, 10/31).

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Grassley said, "Whileeveryone talks about the need for sunshine, there are a few tax-exempthospitals in the shadows that are bent on pulling the blinds and closing thedrapes." He added, "If these hospitals continue to press for keepingthe public in the dark about how they justify $50 billion in tax breaks a year,that will greatly color my views about the need for legislation."

Some not-for-profit hospital officials argued that the proposed changes wouldcreate an undo burden on the hospitals and be too restrictive in the definitionof community service. According to the Times, "Hospitalleaders argue that they should not be judged on charity care alone" as"they provide an array of community services, from mobile health anddental vans to free screenings, educational programs, research and support forcommunity clinics" (Contra Costa Times, 11/1).

Hospital group spokespeople also said Medicare cost shortfalls that result inlosses to hospitals should beconsidered charity work (CQ HealthBeat, 10/31).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.