The Internal Revenue Services push to swiftly set sweeping new criteria for how tax-exempt hospitals disclose aid to their communities has met stiff opposition from the industry, which contends hospitals need more time and greater leeway to report subsidized care and related services.
The American Hospital Association is behind the effort to slow the proposed changes. The Chicago-based trade group enlisted sympathetic hospitals to file objections using an association-drafted form letter and last week submitted its own 11-page complaint.
Hospitals will face extraordinary burdens to collect and report information needed to satisfy the proposed criteria, argued the associations general counsel, Melinda Hatton, in a letter dated Aug. 21. Some questions are irrelevant or unclear, according to the letter. And missing are two key expenses considered by many hospitals as community aid, Hatton wrote.
The AHAs position on delaying implementation runs counter to that of some patient advocates. Mark Rukavina, executive director of the Access Project, a community and patient-advocacy group based in Boston, said expanded reporting of charity care, billing and collection practices will boost hospitals accountability to taxpayers and low-income patients. For many struggling with unaffordable medical bills, the changes cannot happen quickly enough, he said. The Access Project is expected to file its comments with the IRS before the Sept. 14 deadline, but has not yet done so, he said.
Rukavina readily acknowledged that adopting such regulatory changes can be difficult, but further delays risk jeopardizing the financial security and health of patients who seek care should hospitals charge the uninsured healthcares so-called sticker price and poorly promote charity- care options, he said. Hospitals uninsured billing and collection practices have come under fire in recent years after reports that uninsured patients often do not receive any of the discounts enjoyed by insured patients and are sometimes faced with aggressive collection efforts. It sometimes seems the IRS is justified in moving this quickly, Rukavina said.
Hatton in her letter urged the IRS to delay by two years its planned 2008 deadline for adopting any new rules. More than 40 hospitals and health systems, along with state hospital associations, echoed the call for more time to adopt any new rules in letters filed during the first two months of the IRS 90-day public comment period for its redesign of the Form 990.
The tax record is widely used by not-for-profits to report annual revenue and spending. Unveiled in mid-June, the revised form includes an add-on questionnaire for hospitals, with expanded and detailed questions about the cost and scope of its subsidized care and other health-related services (June 4, p. 6).
The push for clear, uniform reporting of community benefitsand specifically aid that hospitals offer to low-income patientscomes amid broader inquiries in Congress and elsewhere into the governance and executive pay at not-for-profit hospitals. Critics have called for an overhaul of the Form 990 to improve transparency.
Hospital industry executives said that theyre not opposed to an expanded Form 990, but not as proposed. Jon Braband, president and chief executive officer of 135-bed Glencoe (Minn.) Regional Health Services, said he supports greater public reporting by tax-exempt hospitals and called the Form 990 an important tool for oversight. The tax form is open to public inspection by law. But he cautioned that such a tool could become a hammer if you muck around with it too much, he said. Braband, who submitted his comments to regulators, said, It seems to be too much and too soon.
Indeed, AHA officials argued that changes to the tax form could have far-reaching consequences for oversight and enforcement.
New criteria should not be used as grounds for tightening the existing, loose definition of community benefits that regulators use to evaluate whether hospitals can earnand keeptax breaks as not-for-profits, the AHA argued in its letter to regulators. While we appreciate the complexity involved in overhauling tax records, the AHA opposes any effort to change the community-benefit standard, including through the expedient of a form, the letter stated.
Eric Smith, an IRS spokesman, said the agency doesnt comment on feedback it gets.
We know that transparency has value, Hatton said in an interview. But current standards allow hospitals greater flexibility to tailor aid to local needs, she argued, while proposed criteria diverge from an existing legal definition of community benefits. For example, Medicare payments fail to cover costs, though write-offs cannot be counted toward charity under proposed criteria, despite a federal requirement that not-for-profit hospitals care for patients insured by all public programs, including Medicare, Hatton said. Bad debt, or unpaid bills, is also unfairly excluded, she said.
Mark Perry, vice president of finance at 252-bed Adventist Medical Center, Portland, Ore., is among the dozens of executives who have lobbied tax officials to expand what can be counted toward the free and discounted care hospitals provide. Leaving out losses from Medicare patients or those who fail to pay their bills unfairly hinders hospitals ability to fully tout aid to those who dont pay the full freight, he said. Bad debt erased about 3% of the hospitals 2006 gross patient revenue of $460 million, based on charges, he said. Charity-care expenses amounted to roughly the same percentage of revenue, he said. Perry argued that patients who may otherwise be eligible fail to enroll for charity care, and end up counting as bad debt.
Not all hospitals want to see bad debt and Medicare losses added into charity tallies. The Catholic Health Association, a St. Louis-based trade group representing Catholic hospitals and health systems, omitted the pair of expenses from its voluntary community benefit-reporting template, a position that won backing from two prominent senators earlier this year. The CHA has not submitted to the IRS its analysis of the revised Form 990 but plans to do so, said Fred Caesar, a CHA spokesman.
Hatton also dismissed as useless a proposal to force hospitals to reveal separately the discounts given to public and private insurers and self-pay patients. Compiling such information would be hugely cumbersome and publicly reporting it could undermine hospitals in contract negotiations with insurers, she said. Mark Deaton, senior vice president and general counsel for the Illinois Hospital Association, blasted the billing and collection query as completely irrelevant.