Senate Aide Says IRS Could Tighten Rules on Nonprofit Hospitals

A top aide to U.S. Sen. Charles E. Grassley has said the Internal Revenue Service currently has the authority to tighten the requirements on nonprofit hospitals for retaining their tax-exempt status. But she said the senator also is considering legislation to achieve that end.

Theresa Pattara, a counsel to the Senate Finance Committee, where Senator Grassley is the ranking Republican, made her comments last week to the American Health Lawyers Association. The definitions of how much “community benefit” hospitals must provide were loosened by the IRS in 1965, she said.

Senator Grassley has repeatedly expressed concern that nonprofit hospitals are operating too much like for-profit entities and turning away too many uninsured and under-insured patients. A 2007 report by the IRS estimated that 79 percent of the tax-exempt hospitals spent 10 percent or less of their revenues on care for those who could not or did not pay.

The announcement is the latest indication that Mr. Grassley’s appetite for tighter regulations for tax-exempt organizations will continue after the November elections. Last week, the senator announced he would push for a new financial disclosures for colleges and universities as part of the revised Form 990, which nonprofit groups must fill out beginning next year.

In addition, Mr. Grassley recently sent extensive questionnaires about the business practices of two medical centers, following press accounts that they were not fulfilling their charitable roles.

While Senator Grassley could still push for legislation to tighten regulations for tax-exempt hospitals, he hopes that the new reporting requirements and increased scrutiny will lead medical organizations to “take serious steps to self-correct” the problems, said his spokeswoman, Jill Gerber.