Senators Focus on Hospital Charity Care in Amendments to Stimulus Bill

Two members of the Senate Finance Committee are seeking to amend the economic-stimulus package moving through Congress with a pair of provisions that focus on how much hospitals do to provide services to patients at little or no cost.

One amendment would require that the federal Centers for Medicare and Medicaid Services, which oversees the nation’s largest health-insurance programs, work with the Internal Revenue Service and the Medicare Payment Advisory Commission, an independent agency that advises Congress, to develop a single, uniform definition of uncompensated care and and charity care.

“This coordination would ensure consistency in reporting of uncompensated care and charity care,” said a press release from Charles E. Grassley, an Iowa Republican who is the top-ranking Republican on the finance committee, and Jeff Bingaman, a New Mexico Democrat. “It would also eliminate a burden on hospitals that otherwise might be facing different definitions of uncompensated care and charity care when dealing with the IRS or CMS,” the press release said.

A recent report from the Government Accountability Office said that the IRS’s current “community benefit” standard—which the tax agency uses to help determine a hospital’s eligibility for tax-exempt status—“allows hospitals broad latitude to determine the services and activities that constitute community benefit.”

The IRS created the standard in a ruling 40 years ago. Nonprofit hospitals must show that they provide benefits to the people and neighborhoods in the region they serve.

The ruling said one way hospitals can show they are providing a community benefit is by having a full-time emergency room open to all people regardless of their ability to pay. Another way is to provide inpatient hospital care for all people in the community able to pay, including those covered by Medicare and Medicaid.

“I’ve been looking into nonprofit hospitals and the charity care and community benefit they provide in return for the billions of dollars in benefits they receive under the tax code,” said Mr. Grassley.
“We need to make sure the [federal] agencies are talking to each other so there’s consistency and accuracy in the way uncompensated care and charity care are defined,” Mr. Grassley said. “We need to make sure taxpayers are getting their money’s worth and that patients are getting affordable care.”

Said Mr. Bingaman: “As this economic crisis worsens and more Americans have a difficult time paying their bills and lose their health insurance, it makes sense for us to ensure nonprofit hospitals are providing free or reduced-cost care at a level that is in line with the substantial benefit they receive from not paying taxes.”

The senators’ second amendment would require the Internal Revenue Service to study the activities of for-profit hospitals and focus on the amount of uncompensated care they provide.

The press release from the senators noted that the IRS soon will release a study of nonprofit hospitals that looks at how much they do to provide charitable services to people in the neighborhoods where they are located.

“For-profit and nonprofit hospitals are subject to the same standards for purposes of federal health programs,” the statement said. “Since they are treated differently under the tax code, it makes sense that the IRS should study the activities of for-profit hospitals, especially the amount of uncompensated care they provide. This kind of study would provide valuable information on how hospitals’ activities differ as a result of their tax status.”