August 9, 2007 | Read Time: 2 minutes
An Internal Revenue Service survey has found that more than half of nonprofit hospitals are spending less than 4 percent of their annual revenues on charity care.
The IRS survey, which will be used to help gauge whether nonprofit hospitals are meeting current requirements for tax-exempt status, also found that 22 percent of the institutions spend less than 1 percent of their revenue on such care.
“We need to change ‘business as usual’ at many of our nation’s nonprofit hospitals,” said Sen. Charles E. Grassley, of Iowa, who is the senior Republican on the Senate Finance Committee, in response to the findings.
“These are self-reported numbers and often include inflated costs or bad debt,” he said. “It’s troubling that even the overly broad figures paint a bad picture of a significant number of nonprofit hospitals doing very little charity care.”
Based on those concerns, aides to Mr. Grassley recently recommended requiring nonprofit hospitals to spend at least 5 percent of their annual revenues or expenses on charity care.
But the American Hospital Association, in Washington, which represents about 4,800 hospitals, said the recent effort to require more-detailed financial disclosure on the Form 990 informational tax return is the logical next step in making sure nonprofit hospitals are fulfilling their missions.
The changes, which would require hospitals to spell out their expenditures more clearly, would help the government and the public get a better understanding of how nonprofit hospitals are earning their tax breaks, said Mindy Hatton, general counsel of the American Hospital Association.
“Until the communities start looking at this in a uniform format and policy makers start looking at it in a uniform format, it’s preemptive to suggest any particular policy or to suggest that the community-benefit standard is anything other than a wild success,” Ms. Hatton said.
She added that she believed most nonprofit hospitals were actually underreporting their level of charity care and other local benefits.
