The Senate Finance Committee is considering mandating nonprofit hospitals to provide a minimum level of charitable patient care and meet other requirements to retain their tax-exempt status and issue 501(c)(3) bonds.
The tax-writing committee proposed the idea in a 39-page document containing policy options for financing comprehensive health care reform that was released yesterday. The committee plans to discuss the financing options at a meeting tomorrow.
The committee said nonprofit hospitals, in addition to providing a minimum level of charitable care, also might have to regularly conduct a community needs analysis, not refuse service based on a patient's inability to pay, and follow certain procedures before instituting collection actions against patients.
Certain hospitals that are either critical to communities or tax-exempt for another reason, such as being an educational or scientific research organization, might not have to meet the minimum charity care requirement to stay tax-exempt, the committee said.
However, nonprofit hospitals would all have to take steps to ensure their operations were properly reported and transparent, it said.
If hospitals did not meet the requirements, their tax-exempt status could be revoked. In some cases where revocation of tax-exemption would be viewed as inappropriate, the hospitals might be subject to excise taxes or "intermediate sanctions," according to the document.
Currently, hospitals are deemed tax-exempt if they provide a "community benefit," as determined by the Internal Revenue Service. However, there are no codified standards for what constitutes community benefit, and it is determined on a case-by-case basis.
"Some have argued that the community benefit standard, which is a facts and circumstances test, is imprecise and not sufficiently stringent," the committee said in the document.
Sen. Charles Grassley, R-Iowa, the committee's ranking minority member, has long complained - including as recently as last week - that with the availability of federal assistance and private insurance, nonprofit hospitals increasingly look more like for-profit hospitals and do not seem focused on treating the poor and indigent.
