A lack of standards and consensus among the nations private, not-for-profit hospitals leads to substantial differences in reported community benefits, the Government Accountability Office said after a review of Internal Revenue Service and CMS regulations and rulings, state statutes, industry guidance and 2006 data from four states.
In a report requested by Sen. Chuck Grassley (R-Iowa), the ranking member of the Senate Finance Committee and a regular critic of not-for-profit governance and disclosure, the GAO summarized the ambiguous federal regulations, varying state laws and conflicting industry policies for disclosing aid hospitals give communities in exchange for certain tax breaks. Grassley said in a written statement that the report underscores the need for a bright line test to be able to determine whether hospitals are meeting the standard necessary to maintain their tax exemption.
The report said federal regulations offer the nations roughly 2,900 private, tax-exempt hospitals broad latitude to meet a 1969 IRS standard for so-called community benefits. Tax officials disagreed, and said such a characterization was an overstatement, the report noted. Meanwhile, state laws vary widely. The GAO reported 15 states have community-benefit statutes or regulations while other states include benefits in licensure requirements. Further variation stems from a lack of agreement over what counts as benefitssuch as whether to include Medicare losses or bad debtand how to tally the cost.
At present, determination and measurement of activities as community benefit for federal purposes are still largely a matter of individual hospital discretion, according to the report. Hospitals must itemize and report charity care and community benefits on a yearly IRS form starting in fiscal 2009, the GAO said, which will collect information on controversial expenses. But the form fails to clarify whether such costs can be considered community benefits under the IRS standard. -- by Melanie Evans