Thursday, May 22, 2008


Attorney Thomas K. Hyatt (Ober, Kaler, Grimes & Shriver, P.C.) published an article on public policy aspects of tax exempt charitable hospitals in Pittsburgh Journal of Environmental and Public Health Law.  The article is entitled "THE ROLE OF THE MODERN CHARITABLE HOSPITAL"  Here is an excerpt:

The question that I bring to you today is one of those questions. I would argue it is one of the most formidable public policy questions of our time. That question is: What is the role of a modern charitable tax-exempt hospital? I would suggest you take note of the date April 28, 2005. That was the date that the following comment was made: "What’s the difference between a profit making hospital and a not-for-profit hospital these days? Not a lot." Who do you suppose said that? If it was an executive from the Federation of American Hospital Systems, the for-profit hospital trade association, I’d have said, "to be expected." If it was a grandstanding politician, I’d say, "it’s okay, it comes with the territory." Do you know who said that? Mark Everson, the Commissioner of the Internal Revenue Service. The regulator in chief of tax exempt hospitals. If the IRS Commissioner says he can’t really tell you the difference between a for-profit and a nonprofit hospital, you had better be worried. It’s a rallying cry if ever I heard one. Clearly, nonprofit hospitals must do a better job of making their case as to why in their current iteration they ought to continue to be recognized as charitable organizations. This is not a new debate. It has been going on for over 50 years. Certainly the health care field has changed a great deal in that period of time. Still, the debate continues.

My premise today is that the role of a modern charitable hospital is threefold. First, it is nonprofit organization. It is a member of the community of nonprofit organizations and as such has a responsibility to that community. Second, it is a tax-exempt public charity. In exchange for freedom from taxation, it has certain obligations to fulfill. Finally, and let there be no mistake about it, a modern charitable hospital is a business enterprise. There are lines to be drawn, lines not to be crossed, but that business enterprise function is a very real part of what they do every day. So let’s look at charitable hospitals’ roles through those three prisms and see where that leads us.


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