How Nonprofit Hospitals Must Prepare for IRS Changes

Larger hospitals and health systems, however, may have to strive even harder than in the past to show that they are meeting a real community need and providing enough charitable care to maintain their nonprofit status—something that may be increasingly difficult when we enter into 2014 and more people move onto health insurance plans as part of the PPACA.

“There’s a lot of uncertainty about what this regulation could do,” says Cerny. “Right now, nonprofit hospitals should be conducting a compliance audit of their activities and make sure they are ready to create these reports, and document everything for the IRS.”

Cerny adds that nonprofit hospitals need to analyze how they are providing a community benefit, and just as importantly, how their offering is different from another organization across town. “The IRS has a very strong interest in whether or not a hospital is truly providing the benefits that entitle them to tax-exempt status,” he says.

Financial leaders take heed, the IRS provisions as part of PPACA may seem simple, but the consequences for interpreting them incorrectly could be disastrous for a nonprofit hospital. If you want to keep your tax status intact, be sure to assign someone on your team (if you haven’t done so already) who can thoroughly complete the community needs assessment process and moreover, someone who can track and monitor the IRS’ progress on the guidelines they will use to assess your efforts to serve your community.