Tuesday, May 19, 2009

Senate Finance Committee Considers Modifying Tax-Exempt Hospital Requirements

The Senate Finance Committee has published a description of various policy options for financing comprehensive health care reform.  Among the many options listed is modifying the requirements for tax exemption of hospitals.  Here is the full text of the proposed modification options (citations omitted):

"The Committee could consider a policy option that would codify organizational and operational requirements for determining whether a hospital is a charitable organization for purposes of section 501(c)(3) tax-exempt status.

Such requirements include, among other things, that section 501(c)(3) hospitals regularly conduct a community needs analysis, provide a minimum annual level of charitable patient care, not refuse service based on a patient's inability to pay, and follow certain procedures before instituting collection actions against patients.

Certain hospitals that are critical to the communities they serve or which have an independent basis for tax exemption (e.g., as an educational or scientific research organization) are excluded f

rom the minimum charity care requirement. The proposal includes provisions designed to ensure proper reporting and transparency of operations. In addition, the proposal provides for excise taxes, or 'intermediate sanctions,' designed to encourage compliance with the operational requirements. These intermediate sanctions could be imposed, for example, in situations where revocation of tax-exempt status is viewed as inappropriate."



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