The Iowa Republican has asked the IRS for data on how many of the nation's approximately 3,000 tax-exempt hospitals are in compliance with charity care requirements.
Senate Finance Committee Chairman Chuck Grassley has renewed efforts to ensure that nonprofit hospitals are earning their tax-exempt status by providing enough services for low-income people.
In a letter to Internal Revenue Service Commissioner Charles Rettig, the Iowa Republican asked for data on how many hospitals are in compliance with the requirements for tax-exempt status and the status of IRS examinations of those not in compliance.
"Making sure that tax-exempt hospitals abide by their community benefit standards is a very important issue for me," Grassley said in his letter.
"As chairman of the Senate Judiciary Committee, I oversaw an investigation into the billing practices of the Mosaic Life Care hospital. That investigation resulted in debt relief of almost $17 million for thousands of low-income patients. This issue is still just as important to me now that I am chairman of the Senate Finance Committee," Grassley wrote.
The Mosaic Life inquiry examined the billing and debt collection practices at the health system after news reports indicated it had sued low-income patients who should have qualified for charity care.
Grassley told Rettig that he was renewing his probe of tax-exempt hospitals after hearing "reports" that "at least some of these tax-exempt hospitals have cut charity care, despite increased revenue, calling into question their compliance with the standards set by Congress."
He asked Rettig for information about whether tax-exempt hospitals are meeting the statutory requirements laid out in section 501 of the Internal Revenue Code, and he cited in his letter an article in Politico that suggested nonprofit hospitals were profiting from the Affordable Care Act while simultaneously cutting their charity care.
In February 2018, Grassley sent a letter to the IRS to inquire about how the agency reviews nonprofit hospital compliance.
Acting Commissioner David J. Kautter responded in April 2018 that the IRS reviews the status of about 1,000 U.S. tax-exempt hospitals each year by reviewing Forms 990, hospital websites, and other information in order to identify the hospitals with the highest likelihood of noncompliance.
Kautter said the IRS assigns either a compliance check or examination to those hospitals that appear to be most at risk of noncompliance.
Melinda Hatton, general counsel for the American Hospital Association, said her organization was confident that nonprofit hospitals are meeting their mission.
“In 2015, an AHA analysis of Schedule H filings reported that 13.3% of tax-exempt hospitals and health systems total expenses were devoted to community benefits programs, and that half of that spending was attributable to expenditures for providing financial assistance to needy patients and absorbing losses from Medicaid and other means-tested government program underpayments," she said.
Hatton said an analysis by Ernst & Young for the AHA found that hospitals' and health systems' community benefit activities outweigh the value of their federal tax exemption by a factor of 11 to one. "According to the report, non-profit hospitals in 2013 were exempt from an estimated $6 billion in federal taxes and provided an estimated $67.4 billion in community benefits," Hatton said.
“Making sure that tax-exempt hospitals abide by their community benefit standards is a very important issue for me.”
Senate Finance Committee Chairman Chuck Grassley, R-Iowa
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.
Grassley asked for information about whether tax-exempt hospitals are meeting the statutory requirements laid out in section 501 of the Internal Revenue Code
The lawmaker is renewing his probe of tax-exempt hospitals after hearing reports that 'at least some of these tax-exempt hospitals have cut charity care, despite increased revenue.'