“This is not an end,” said Maureen Mudron, deputy general counsel for the American Hospital Association, of the delay. Mudron criticized the disclosures as burdensome, redundant and unrelated to health reform law provisions.
She said more needed to be done to give hospitals clear and usable guidance.
“Our first choice would have been to push the do-over button and start over,” said Michael Regier, general counsel for VHA, which purchases supplies on behalf of tax-exempt hospitals.
VHA, the AHA and more than a dozen other organizations urged the IRS to jettison all questions related to the Affordable Care Act requirements and replace them with new ones on the tax form. “The IRS clearly wasn't in the position to do that,” said Regier, who also is the VHA senior vice president of legal and corporate affairs.
Regier called the optional reporting for another year “the next best initial step.”
Hospitals need formal federal rules to meet the health reform law's provisions for tax-exempt hospitals, while regulators need them to produce reporting forms to allow federal tax officials and Congress to monitor compliance, argued healthcare officials and attorneys.
The sector seems likely to get some guidance. Treasury Department officials are developing guidance for the Affordable Care Act requirements, Sandra Salstrom, a Treasury Department spokeswoman, said in an e-mail. Salstrom said she could not provide a date for release of the guidance.
One issue under review by Treasury Department officials is the definition of “extraordinary collection efforts” under the health reform law, she said. Hospitals cannot employ “extraordinary” efforts to collect bills without first ensuring patients do not qualify for financial assistance.
The VHA, AHA and Healthcare Financial Management Association singled out new collection effort questions on the Form 990 for criticism and called for a definition.
As it announced the delay, the IRS invited additional comment for ways to “improve the clarity and reduce the burden” of new disclosures but also said the hospital sector should use the extra year to “familiarize itself with the types of information the IRS will be collecting” under the Affordable Care Act.
Healthcare advisers also applauded the delay and agreed further guidance was needed. “It's always nice to get a reprieve or extension from the IRS,” said Kendi Ozmon, an associate and tax attorney with Ropes & Gray. “No one is going to be unhappy about that.”
Ozmon said she hopes more guidance will accompany the additional time. Until then, hospitals must look to the limited language of the Affordable Care Act, guidance from the Joint Committee on Taxation and the Form 990 for direction on how to comply with the law.
Keith Hearle, president and founder of healthcare consulting firm Verite Healthcare Consulting, said more information—such as question-and-answer guidance (where the IRS replies to common questions about disclosures)—or revisions to the tax year 2011 Form 990 Schedule H are needed.
The disclosure requirements conflict with the Affordable Care Act, he noted. The law prohibits hospitals from charging low-income patients eligible for financial aid the sticker price for services. The Form 990 asks whether the uninsured were charged the sticker price, he said, though some uninsured may be so wealthy they would not qualify for financial aid.
The new disclosure rules are among the latest changes to tax-exempt hospital oversight to emerge after scrutiny of the tax-exempt sector, and not-for-profit hospitals in particular, increased during the last decade.
Another measure, recommended last week by the IRS Advisory Committee on Tax Exempt and Government Entities, would expand disclosure. The committee recommended an end to group returns that allow multiple not-for-profits to collectively file a Form 990. Doing away with group returns would improve transparency and accountability.
Health systems that combine hospitals' disclosures on one return would be required to separately file yearly tax records. The proposal conflicts with efforts by the AHA to allow all health systems to file group returns. In 2010, the AHA said health systems owned 60% of not-for-profit hospitals.