Assignment 7 Taxation of Healthcare Institutions
Does the ACA change the “community benefit” standard? If so, how; if not, why not?
To qualify for the federal exemption, charitable hospitals now must * conduct a community health needs assessment (CHNA) at least once every three years, * adopt an implementation strategy to meet the health needs identified in the assessment, * publicize and implement a written financial assistance policy, essentially a charity care policy for services to indigent patients, * adopt a written policy on nondiscrimination in emergency services, * limit the amounts charged for care to indigent patients, and * Not attempt "extraordinary collection actions" without first determining whether the patient meets financial assistance criteria.
The CHNA must include "input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health" and must be made "widely available to the public." Failure to comply subjects hospitals to a penalty tax.
The health reform law also adds new review and reporting requirements. Section 501(r) requires hospitals to be audited at least once every three years for compliance with the CHNA requirement, and organizations will need to file their audited financial statements and report annually to the IRS how they are meeting community needs. Finally, the reform laws require the secretaries of the Treasury and HHS to report to Congress annually on the levels of charity care hospitals are providing, hospitals’ bad debt expense, unreimbursed services, and similar items. In a nutshell, a healthcare organization seeking to maintain federal tax exemption will need to meet these new charity care and community benefit requirements in addition to the traditional charitable purpose and private inurement standards. The intent of Congress through ACA—is that it will set some parameters for...
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