Schedule H doesn't give whole picture: AHA

The American Hospital Association says new requirements on reporting of charity care and community benefits provided by hospitals in exchange for tax breaks are flawed and unfair to health systems and urged the Internal Revenue Service to revise its disclosure rules.

Hospitals must report charity-care and community-benefit spending for the first time on 2009 tax forms known as the Form 990 Schedule H. In a letter to the IRS, the AHA said research commissioned by the trade group found the reporting will exclude charity and community benefits subsidies from one hospital to another in systems with hospitals that file separate Schedule H forms.

Under the Schedule H, hospitals with separate employer identification numbers must report separately. Any benefits provided by corporate system headquarters that do not share an employer identification number with hospitals will also be omitted from reporting.

Urban Institute researchers conducted 12 health system interviews and an online survey of 210 health systems with three or more tax-exempt hospitals, and 76 systems responded. Roughly 60% said systems provided financial support for community benefit activities.

Hospitals that operate nursing homes or provide home-care services with identical employer identification numbers will also suffer in comparison to those without such ancillary business, said Melinda Reid Hutton, senior vice president and general counsel for the AHA. Expenses for the ancillary business will skew ratios of hospitals' charity care and community benefit as a percentage of expenses.

Hutton said the trade group is open to ideas from the agency on ways to revise reporting.

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