Health Care Reform Keeps Evolving for Hospitals

Blog posted by Nancy Rehkamp (retired)

The sweeping health care reform legislation is explained in literally thousands of pages. Most of us, even members of Congress, did not fully understand all of the changes that will eventually result from the legislation. During the last 30 days, a number of developments have helped provide greater clarity about what will be expected of hospitals (and eventually other nonprofit health care providers) to maintain their tax exempt status.

Some of the issues resolved include the following:

• An Illinois State Supreme Court decision to uphold the lower courts decision to strip Provena Covenant Medical Center of their tax exempt status for failure to provide adequate free or discounted care.
• The Financial Accounting Standards Board (FASB), the policy board for recommending generally accepted accounting principles, issued its preliminary standard for reporting and accounting for subsidized care or charity care.
• The new IRS 990 forms for nonprofit tax reporting began requiring disclosure of charity care and other subsidized community benefits at cost for an organization’s FY 2009.

In addition, health care reform legislation includes the following elements that directly affect hospitals:

• Hospitals must conduct community assessment surveys every three years.
• They must also adopt and publicize a financial assistance policy.
• Aggressive billing and collection efforts for those who meet the criteria for financial assistance are prohibited (under most circumstances).
• The IRS will review a hospital’s tax exempt status every three years.
• Hospitals must report to Congress on the amount and trends in free care and charity care that substantiate the provision of a tax exemption.
• Charity care and transparency are more concretely defined specifically for hospitals.

Although, many states, advocacy groups, and provider associations have developed recommendations for defining and reporting charity care (including Hospital Financial Management (HFMA) and the American Hospital Association) health reform should assure that there will not be variances between states or the method with which the IRS evaluates tax exempt status.

All of these issues will continue to evolve and expand beyond the standards expected of hospitals and eventually will begin to affect home care, skilled care, and other community based nonprofit providers. There are good summaries concerning charity care at Modernhealtcare.com and Chicago Business. The IRS also provides an executive summary on related issues it is evaluating.