Tax-exempt hospitals expected to focus on community
Charitable hospitals and health systems have the opportunity to create comprehensive, long-term strategies and procedures to help improve their communities’ healthcare needs, all the while retaining their tax-exempt status with the Internal Revenue Service.
Under the Patient Protection and Affordable Care Act of 2010, the federal government requires tax-exempt hospitals, health systems and government hospitals that have tax-exempt status under 501(c)(3) to identify the health needs in their communities.
These entities are also required to have policies regarding financial assistance in order to maintain their charitable status, according to Kurt Bennon, engagement director at CliftonLarsonAllen, who was also the keynote speaker during a CliftonLarsonAllen-sponsored webinar regarding tax-exempt hospitals and maintaining their status due to the regulations.
Cynthia DuPree, a partner and director of Consulting and Compliance Services for Draffin & Tucker LLP says charitable hospitals must perform community health needs assessments with input from the community, report to the community on these assessments and maintain policies and procedures for providing medical care and financial assistance to people who are medically underserved, low-income, among minority populations and who have chronic diseases.
The requirements, which fall under Section 501(r) of the Internal Revenue Code, mean that qualifying hospitals must also develop and document strategies in order to implement community health needs assessments and related activities, said DuPree.
“There were concerns from the government that tax-exempt healthcare organizations were not always giving back enough to the community and this is a way for them to report what they are giving back. They have to fill out the IRS 990 non-profit tax form, Schedule H,” said DuPree. “They will have to report back more information than they ever have before. The government wants to ensure that what the organization gives back is also what the community is in need of, which is the purpose of the community needs assessment.”
According to Bennon, charitable hospitals face the loss of tax-exempt status and financial penalties if they fail to comply.
“For fiscal years beginning after March 23, 2010, charitable hospitals must have written financial assistance policies and written emergency medical care policies,” he said. “For fiscal years beginning after March 23, 2012, charitable hospitals must complete community health needs assessments within that tax year or the two preceding tax years.”
DuPree said that by the end of 2012, every charitable healthcare organization will need to be in compliance with the regulations or they face a $50,000 fine for each year they were not in compliance starting in 2013. The assessments and written policies must also be done every three years.
Anuj Goel, vice president of Legal and Regulatory Affairs at Massachusetts Hospital Association, said charitable hospitals in Massachusetts have already had most of the regulations and guidelines in place for several years.
“The Massachusetts Attorney General’s office has really been on the forefront of all of this. They issued community benefit guidelines several years ago which actually go beyond what the IRS has issued,” he said. “Our hospitals, depending on where they are located, have been doing good, comprehensive overviews of communities - looking at needs and looking at data, and reaching out to the community to hear from them.”
DuPree said after the assessment reports are written, they must be published on the organization’s web site or made available at a public library.
“This is going to be a big change for a lot of hospitals, and even though some may have performed assessments like this before, they were never required to,” said DuPree.
