Senate Finance Committee chairman Max Baucus unveiled health care reform legislation yesterday that would require bond-financed and other nonprofit 501(c)(3) hospitals to conduct regular assessments of community health needs, implement financial assistance programs, and limit how much they could bill certain patients and how far they could go to collect.

Muni market participants said that they plan to keep a close eye on the Montana Democrat's bill as it moves through Congress.

The bill, dubbed America's Healthy Future Act, would place additional responsibilities and restrictions on nonprofit hospitals in an attempt to effectively prove their charitable bona fides.

Every hospital would be required to conduct a community health needs assessment at least once every three years with input from representatives of their community and to adopt a strategy to address whatever needs are identified.

The hospital would have to report how it is addressing those needs to the Internal Revenue Service in its Form 990, the annual information return filed by charitable organizations. Failure to complete such an assessment would result in a penalty of up to $50,000. Failure to disclose how the hospital is meeting its needs would result in the penalties that currently exist for incomplete returns.

But market participants said yesterday that establishing new reporting requirements on charitable care for hospitals may be premature. The IRS recently published a new Form 990 that nonprofit hospitals must begin using next year, which includes an extensive Schedule H section requiring them to give detailed financial and other information concerning the community benefits they provide.

"We still haven't played out the new 990 requirements," said Charles Samuels, a lawyer with Mintz Levin Cohn Ferris Glovsky & Popeo PC who is counsel to the National Association of Health and Educational Facilities Finance Authorities. "You always have this problem in government where new requirements are proposed before the just-enacted proposals have been implemented."

Each nonprofit hospital also would be required to adopt and publicize a financial assistance policy that would ensure universal access to emergency care. The policy would have to clearly state the eligibility criteria for financial assistance and the basis for calculating the charges to be billed to the patients that qualify for it.

In addition, hospitals would be limited to charging patients requiring financial assistance only as much as they charge insured patients. And they would not be permitted to pursue extraordinary collection actions against a patient - including lawsuits and arrests - without first making reasonable attempts to inform the patient of its financial assistance program.

The Joint Tax Committee yesterday said the additional requirements for 501(c)(3) hospitals would have negligible revenue impacts.

Baucus' proposed bill is would be less burdensome on nonprofit hospitals than some of the health care reform ideas considered by the committee earlier this year.

A list of possible reforms distributed in June, included requiring nonprofit hospitals to meet national minimum standards of charitable care to remain tax-exempt - a move some market participants warned would erode operating margins and, as a result, bond ratings.

Baucus' Republican counterpart on the committee, ranking minority member Sen. Charles Grassley of Iowa, suggested in May that Congress revoke all nonprofit hospitals' tax exemption and instead replace it with tax credits or deductions for charitable care.

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