Posted on June 3, 2009

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Hospitals Will Fight Legislation Requiring Charity Care Standards

An association representing America's hospitals is preparing to launch a lobbying campaign aimed at preventing Congress from including more stringent hospital charity care requirements in healthcare reform legislation, the New York Times reports.

Prior to passage of the Tax Reform Act of 1969, the IRS required nonprofit hospitals to provide charity care in order to qualify for tax-exempt status. That requirement subsequently was dropped as long as hospitals provided benefits to the community in other ways such as health fairs, cancer and cholesterol screenings, and by providing emergency care. For years, however, consumer groups have argued that the line between for-profit and nonprofit hospitals has blurred, causing some in Congress to argue that nonprofit hospitals do not provide enough charity care to justify their tax-exempt status.

Indeed, Senate Finance Committee chair Max Baucus (D-MT) and ranking member Charles E. Grassley (R-IA) have proposed standards that would require hospitals to provide "a minimum annual level of charitable care" to get or keep their tax-exempt status. Under the committee's proposal, tax-exempt hospitals could not refuse service because of a patient's inability to pay and would have to follow certain procedures before taking collection actions against a patient late in paying his bills. If a hospital failed to meet the standards, the government could revoke its tax-exempt status or impose excise taxes as a penalty.

The American Hospital Association opposes such requirements, arguing that it would unnecessarily penalize nonprofit hospitals that provide benefits to the community in ways other than charity care. The association has urged hospital leaders around the country to contact Congress by telephone or e-mail to express their opposition to any such standard.

"A formulaic, one-size-fits-all charity care standard will hamstring hospitals' efforts to respond to the unique needs of their communities," said a bulletin issued by AHA. "It would penalize children's, teaching, and research hospitals and those in rural areas because they provide community benefit in a variety of forms other than just charity care."

Pear, Robert. “Hospitals Mobilizing to Fight Proposed Charity Care Rules.” New York Times 5/31/09.

Primary Subject: Health
Secondary Subject(s): Public Affairs

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