October 14, 2008
Hospitals Use 'Broad Latitude' in Reporting Charity Care, Report Finds
By Eric Kelderman
Washington
While nonprofit hospitals largely agree on what they think should and shouldn’t count as a “community benefit” provided in exchange for their tax-exempt status, there are large disparities in the way they measure and report that information, according to a new report from the Government Accountability Office.
Hospitals are generally willing to include charity care for the uninsured and the unreimbursed costs of Medicaid for low-income patients to meet their obligations as tax-exempt organizations, the GAO found. But the study of more than 400 hospitals in California, Indiana, Massachusetts, and Texas found differences in how value such expenses.
Nearly 60 percent of the nation’s hospitals were considered nonprofit institutions in 2006 and must provide a “community benefit,” including an emergency room that is open to everyone regardless of ability to pay and inpatient care for those able to pay or who receive Medicare or Medicaid, among other things. Fifteen states also have community benefit standards for nonprofit hospitals.
But the hospitals have come under increasing scrutiny from both the Internal Revenue Service and Congress, especially from Sen. Charles E. Grassley, an Iowa Republican and the ranking member of the Senate Finance Committee, who has questioned whether the hospitals are too concerned with earning profits.
New Questions
In 2006, the IRS sent a questionnaire to more than 500 tax-exempt hospitals, and found that 79 percent spent 10 percent or less of their revenues on care for those who could not or did not pay.
In response to the GAO study, the IRS said that although the hospitals used a wide variety of methods to report their activities, the agency could still use its power to enforce tougher restrictions on what qualifies as a community benefit. In addition, the agency expects the reporting requirements on the new Form 990 to make hospital finances more transparent to federal regulators and the public.
In September, Senator Grassley announced that he sent an 11-page letter to the M.D. Anderson Cancer Center, in Houston, and the University of Chicago Medical Center with detailed questions about their business practices. The senator said he was responding to press accounts that the hospitals had not treated poor patients equitably or had refused to care for them at all.
‘A Fair Return’
Senator Grassley said the GAO study showed that hospitals still had too much leeway in defining how they operate and report their information.
“As long as there’s such uncertainty and inconsistency in the definition of community benefit, it’ll be impossible to gauge whether the public is getting a fair return for the billions of tax dollars that tax-exempt hospitals don’t pay,” he said. “While the new IRS Form 990 will help, Congress may need to fill in the blanks since hospitals still get to choose how they calculate their costs.”
Comments
Commenting is closed for this article.
Previous: Grant Makers Urged to Respond to Financial Crisis
Next: Texas Court Orders $6.5-Million Payment in Planned-Gift Lawsuit
The hospitals should be required to use the same standard for charity care. When you don’t charge wealthy donors for medical services,that should not be counted as charity. How can a university hospital without an emergency room have charity care?You’d have to ask Dr. Kern Wildenthal former president of UT Southwestern Medical Center in Dallas that question.The UT System audit said that the auditors couldn’t even determine how the Southwestern charity numbers were derived.
— Jack Oct 15, 06:40 PM #