Sen. Charles Grassley (R-Iowa) is continuing to increase the pressure on healthcare organizations to improve documentation of the community benefits they deliver in exchange for receiving tax-exempt status.
The influential chairman of the Senate Finance Committee also continued to attack the leading organization representing the nation's hospitals for holding to an expansive view of what constitutes community benefit.
While criticizing the American Hospital Association, Grassley raised the stakes by lauding the Catholic Health Association, which has developed a document that can be attached to IRS Form 990, which must be filed by all organizations that are exempt from federal income taxes under section 501 of the Internal Revenue Code.
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Many states already require supplemental forms that must be filed in addition to IRS Form 990. The CHA-developed template should be considered for wide adoption, Grassley said.
CHA developed the template to Part III of the form to follow its community benefit guidelines. The template will be helpful to hospitals because most facilities will be required to electronically file their Form 990 and won't be able to include their annual report as part of the filing.
"I hope all tax-exempt hospitals will use the CHA reporting guide," Grassley said. "The public and policymakers need a clear understanding through standard reporting of the level of charitable care and community benefits that tax-exempt hospitals offer. Right now, reporting standards are all over the map, and it's nearly impossible to know what's real and what's accounting gimmickry."
While holding up the CHA initiative as a positive example, Grassley had harsh comments for the AHA, which hasn't publicly committed to using the CHA guidelines. The result is that the AHA "is perpetuating a murky picture of its member hospitals' charitable care," he said.
The AHA is calling on tax-exempt hospitals to include bad debt and Medicare shortfalls as part of their community benefit, Grassley said.
The AHA includes bad debt under the category of uncompensated care, and as a part of AHA policy it combines bad debt and charity care, for which facilities don't expect to receive payment because of patients' inability to pay.
"Bad debt isn't necessarily a reflection of charitable care and community benefit – it clouds the picture," Grassley said. "I encourage all tax-exempt hospitals to operate in good faith and follow the leadership of the CHA and use the CHA reporting guide."
In a letter last week to the IRS, the AHA sought to have more input in developing rules that are expected to expand what not-for-profit organizations must report on community benefits. The letter noted a study released by Ernst and Young last week indicating that all hospitals responding to an IRS inquiry on community benefit have established policies and provide large amounts of uncompensated care. The report urges the IRS to analyze the questionnaire responses before adding to hospitals' reporting requirements.