In the name of accountability, hospitals should embrace new Internal Revenue Service guidelines seeking more information on how and why they deserve tax-exempt status.
The IRS has required that hospitals have a policy in place saying they treat anyone entering the emergency room regardless of ability to pay. But by widening its community-benefit standard for tax-exempt hospitals, the government intends to look for proof of indigent care in the ER and throughout the institution. The day is fast approaching when the tax man will demand statistics and breakdowns, not just promises and pledges.
As Deanna Bellandi reported last week, the IRS guidance memo is not a formal ruling, but it does offer insight into the agency's thinking on enforcement issues. Hospital managers would be wise to fully document how their organizations are meeting charity-care requirements. Administrators also should be prepared to answer a series of 14 questions an IRS agent might ask to gauge a hospital's charitable activities.
For example, an agent may want to know if a hospital keeps detailed records about the number of times and the circumstances under which it provided free or subsidized care. The gumshoe might inquire how and when the hospital decides whether a patient will be able to pay for services rendered, or if outpatient and diagnostic services are provided to the needy.
These are fair questions for healthcare organizations seeking to maintain tax-exempt status. Hospitals already provide more than $20 billion per year in uncompensated care. Fortunately, many already have detailed breakdowns on charity care, bad debt, in-kind services and other community-benefit programs. Those not aggressively tracking their activities face financially painful consequences.
Further evidence that the government is taking a firmer stand came in a recent federal appellate court decision denying tax-exempt status to a surgery center co-owned by Redlands (Calif.) Community Hospital. Tax-exempt status is not a given right. It must be earned.