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Dry Run Lets Hospitals Take the Plunge on New IRS Filing

John Commins, for HealthLeaders Media, November 5, 2008

Nonprofit hospitals—big and small—should heed the suggestions of the American Hospital Association and the Internal Revenue Service and compile a "dry run" on their complete Schedule H tax forms. People involved with the process believe that a lot of headaches and stress can be reduced next year with a little practice and a little extra effort this year.

"It's a pretty prudent strategy," says Ron Schultz, a senior advisor at the IRS. "It makes good sense to me for organizations to practice on this and work within the transition period."

This year, hospitals must file only one section of the six-part Schedule H: Section 5, which asks for a list of facilities. Schultz says the IRS wants the list to get a better estimate on what it can expect for future Schedule H filings, and to introduce hospitals to the new schedule. "We picked facilities over other information because we felt it was by far the least burdensome for them to deal with," he says.

The AHA has been encouraging the Form 990 Schedule H dry runs and in September began hosting teleconferences and sessions to prepare rural hospitals for the new filing requirements. "Given the breadth and depth of the new IRS requirements, we see it as a member value to help (rural hospitals) understand and prepare for them," says John Supplitt, senior director of AHA's Section for Small or Rural Hospitals, in a media release.

Next year, the entire Schedule H must be completed, including Section 6, which asks nonprofit hospitals to write an essay assessing the healthcare needs in their communities. "It's hard to assert that you are providing a community benefit if you have not assessed the community needs," says Keith Hearle, president of Verite Healthcare Consulting, LLC, in Alexandria, VA, and a longtime consultant to the Catholic Health Association. "If a hospital has never done a needs assessment or read one done by a local health department it's probably time to put some effort into that process."

Hearle says there is nothing in Section 6 that prevents hospitals from starting work on those questions today. For some hospitals, it can be done with existing staff. Other hospitals may need to hire new people to direct the process.

"It depends on the extent to which they have been reporting community benefits historically and have built an infrastructure around all of this stuff," Hearle says. "Does it already exist or are they starting from scratch?"

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