990 frustrations

Healthcare providers last week criticized the reform law's additional reporting requirements for tax-exempt hospitals and sought clarity from the Internal Revenue Service, which has yet to release a regulation on those changes.

This month the IRS offered a five-day period for the industry to comment on the Patient Protection and Affordable Care Act's changes to hospital information collection through the Form 990 (See story: "IRS accepting comments on changes to form 990 rules" May 14, 2012). The American Hospital Association and the Healthcare Financial Management Association on May 16 sent a joint letter to the IRS and the U.S. Treasury Department that focused primarily on the revised Schedule H, which requires not-for-profit hospitals to document community benefits.

The AHA and HFMA—which represent about 5,000 hospitals and more than 39,000 healthcare financial management executives, respectively—complained that Schedule H's current structure will require multihospital systems to fill out the same answers multiple times. They say that could lead to as many as 200 pages for Schedule H alone.

The groups also focused on the community needs assessment that the ACA requires hospitals to conduct once every three years. They contend that Schedule H's current requirement that each participating hospital develop a separate and independent community needs assessment “undermines the benefit to the community of hospitals working together and creates unnecessary paperwork.” Instead, they suggest a method that would allow a shared community needs assessment among hospitals.

In his written testimony for the House Ways and Means oversight subcommittee, Michael Regier, senior vice president of legal and corporate affairs at hospital provider network VHA, said the organization needs more direction from the IRS on areas such as the applicability of the law's requirements to hospital joint ventures and what constitutes “reasonable efforts” to determine whether a patient is eligible for financial assistance.

Regier also laid out a host of concerns the Irving, Texas-based organization has regarding IRS guidance about the community needs assessment requirement. These include requiring each hospital facility in a multihospital system to issue a separate written report, imposing detailed mandates about consultation with public health agencies and representatives of specific populations in a community, and mandating that each hospital attach its most recently adopted community health needs assessment implementation strategy to its Form 990.

But there's a bigger issue related to the community needs assessment than prescriptive or duplicative reporting requirements, said Douglas Mancino, a lawyer at Hunton & Williams in Los Angeles specializing in healthcare and tax-exempt organizations. “I think, frankly, that's a problem that's grossly overstated,” Mancino said. “Here's the problem: Nobody yet knows what will be sufficient to satisfy the community needs assessment because there are no regulations.”

He added that he thinks the IRS will make it less burdensome for multihospital systems so they “don't have to do everything from scratch.”

Rep. Charles Boustany (R-La.), chairman of the oversight subcommittee, said the panel needs to host more hearings on tax-exempt organizations, which he said represent a complex and growing area that has not been subjected to much federal scrutiny.

And while he also heard from witnesses representing the nation's colleges, universities and charitable organizations, Boustany made a point to mention the current tax-related challenges facing hospitals.

“The burdensome requirements and the ambiguity in what they're being asked to provide is a problem,” Boustany told Modern Healthcare. “The fact that the final rules have not been issued—it's been a couple of years now—we need to get some clarity from the IRS on all of that.”