Thursday, January 29, 2009
Recent news reports indicate that nonprofit hospital charity care is again under scrutiny. Increased scrutiny is, in part motivated by states greedily eyeing what they view as deep pockets and in part by watchdog groups pushing for more accountability and transparency from nonprofit hospitals. A January 26, 2009 Houston Chronicle article, for example, states:
Scrutiny could increase for Texas' nonprofit hospitals as the state and the IRS try to determine the true value of uncompensated care the hospitals provide. State Sen. Jane Nelson wants the hospitals to submit data about the care they provide and the way state and federal indigent-care reimbursement funds are spent. Nelson, R-Flower Mound, was behind legislation that created a work group to study and redefine charity-care terms, the Fort Worth Star-Telegram reported in its Monday's editions. "We need to be reimbursing our hospitals fairly for the uncompensated care they provide. But we also have a responsibility to the taxpayer, which means more transparency and consistency is needed," she said in a statement. The work group appointed by Texas legislators has devised a standard way of defining and calculating the cost of charity care. The group says that right now, it's hard to get a clear pictures of how the system is working. For instance, Texas nonprofit hospitals report up to six different calculations of the charity care they provide.
A January 28, 2009 article in the Wisconsin State Journal states:
Nonprofit hospitals will have to file a new report next year with the Internal Revenue Service — for the first time accounting for the free health care and other benefits they provide to justify their tax breaks. The move is one of several measures being taken by federal, state and local governments to make nonprofit hospitals prove they deserve their tax-free status or pay up. The pressure could increase in Wisconsin and elsewhere this year because of budget shortfalls stemming from the economic recession, observers say. "I expect a resurgence of interest among municipalities in extracting payments in lieu of taxes," said Alan Zuckerman, a health-care consultant in Philadelphia. "Municipal budgets are going to be strained. Not-for-profits are a logical target." . . . Nationally, a bill to be introduced in Congress soon would require nonprofit hospitals to spend at least 5 percent of their budgets on charity care. Meanwhile, a decision in Illinois to strip a hospital of its tax exemption is headed for the state Supreme Court. The state says the hospital provided too little charity care. Hospitals are closely following the Illinois case as a possible sign of challenges to come, said James Orlikoff, a health-care consultant in Chicago.
Meanwhile, class action lawsuits against nonprofit hospitals based on their failure to provide adequate charity care are winding their way through courts. In Illinois, hospitals appear eager to enter into settlement agreements in the wake of the state's denial of tax exemption to Provena Health Care System. For example, Ressurection Health Care Corporation, a Catholic based tax exempt hospital, recently entered into this class action settlement agreement requiring it to increase and document the amount of its charity care, as well as to change its billing procedures with respect to uninsured patients.