HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Sunday, May 27, 2012

Guest Blogger Nicole Huberfeld: Hidden Responsibilities for Hospital Boards in New Public Benefit Rules



New regulatory regimes often contain both intended and unintended effects.  The example I have in mind is PPACA section 9007, entitled “Additional Requirements for Charitable Hospitals,” which I discussed briefly in my first post.  This section requires tax-exempt hospitals to prove their public benefit by four mechanisms, described by the IRS thus:

Section 501(r)… imposes new requirements on 501(c)(3) organizations that operate one or more hospital facilities (hospital organizations). Each 501(c)(3) hospital organization is required to meet four general requirements on a facility-by-facility basis:

  • adopt and implement written financial assistance and emergency medical care policies,
  • limit charges for emergency or other medically necessary care,
  • comply with new billing and collection restrictions, and
  • conduct a community health needs assessment (CHNA) at least once every three years.

These requirements seem to respond to critiques from Senator Grassley and others that tax-exempt hospitals had stopped earning their subsidy from the federal government (which, arguably, had been a downward slope since the IRS issued Revenue Ruling 69-545 creating the ‘community benefit’ standard after Medicare and Medicaid were enacted in 1965).  The new §501(r) will begin to reattach the concept of free care for the poor to federal charitable status. 

In the wake of the JPMorgan Chase revelations (scandal?) and renewed discussion regarding the Volcker Rule, one can’t help but think that a collateral consequence of §9007 may be to place additional, potential conflict-creating duties on hospital board members.  Hospital boards will be responsible for implementing new financial assistance policies, reviewing charges for certain medical care, ensuring their hospital(s) do not improperly collect debts, and conducting community health needs assessments; but that’s not all.  The CHNA in particular seems to be a potential sticking point for boards, as the public health-driven concept could be at odds with the board’s drive to ensure the mission of the hospital is fulfilled. 

For example, what if the CHNA determines that untreated STDs are a major issue in the community and an educational campaign regarding “safe-sex” is warranted, but the tax-exempt entity is a Catholic hospital.  If the board ignores the CHNA, it may violate its duty of care if it does not adopt an “implementation strategy” as required by 501(r)(3)(A); but, if the board implements the strategy to conduct safe-sex education, it may run afoul of its mission as a Catholic hospital and violate its duty of obedience.  Either way, board members face potential liability, and the hospital faces potential excise taxes.  Though I think the new community benefit rule is generally a good idea, I wonder if we are asking too much of hospital boards.  Thoughts? 

- Nicole Huberfeld

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