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Show Hingkley Journal of Politics 2005 Hospital Charity Care In addition to the Federal Medicaid and Medicare programs, the government has provided a way in which institutions may receive benefits for providing care to the uninsured and underinsured. Through not-for-profit hospitals (NFP), which are generally 501(c)(3)s entities, the U.S. tax code provides NFPs with certain tax exemptions, for which these tax-exempt hospitals are required to provide charity care. Community care, used interchangeably with charity care, is defined as various physician and hospital-related services Provided at discounted or zero cost to uninsured or underin-sured individuals who are unable to pay for the care (Academy Health 2003). In return, hospitals receive government funding and/or extensive tax benefits on the condition that they provide community benefits. Community Care Programs Many states rely on safety-net hospitals to receive funding from the government. These funds are proportionately pro-vided through Medicare and Medicaid. In their 1999 report, Fagnani and Tolbert (1999) explained the importance of safety-net hospitals and their funding structure: "To ensure access to care for these people, our nation relies on a network of hospitals and health centers-so-called 'safety net hospitals"- whose members are willing to provide care to anyone in need, regardless of their ability to pay. These Providers receive subsidies to compensate them for the nonreimbursable care they supply. The major sources of such financing are the Medicare and Medicaid Disproportionate ^hare Hospital (DSH) programs, along with appropriations from state and local governments." Whereas Federal DSH programs directly subsidize safety net hospitals for care provided to the elder and indigent, NFP hospitals must qualify as a charitable organization that will Provide for the community in order to receive tax exemption benefits as a 501(c)(3). The tax benefits provide 501(c)(3)s eXemption from federal income taxes, state and local income taxes, sales taxes, and property taxes (Community Catalyst 2003, 9). NFP hospitals currently make up 85 percent of the nation's 5,000 hospitals (Abelson 2003). Therefore, community care initiatives are dependent upon the obligations of NFP hospitals. Historically, the quintessence of hospitals was to provide free or reduced-cost care to the maximum level of each hospital's financial ability. This provision, however, has become less definitive and demanding, which is why 501(c)(3)s-in addition to the tax benefits they receive-are required to fulfill certain charitable obligations. Various ways in which these hospitals provide care include, but are not limited to: free care, discounted care, community outreach initiatives, and teaching programs. Free care is medical treatment provided by a hospital without the expectation of payment. It is provided without Proof-of-payment and upon determination of eligibility (Community Catalyst 2003, 12). Similar to free care is reduced-rate care, which discounts services provided to uninsured or underinsured patients that are determined to be unable to pay. Many hospitals provide community outreach programs. These programs might include free screenings, such as breast cancer or blood pressure screenings, and eye and hearing tests that are advertised and free to the community. Lastly, teaching hospitals generally require a certain number of hours of free services provided to the community. Teaching hospitals usually have the highest number in charity care hours and free services provided. For-Profit vs. Not-For-Profit (NFP) Hospitals Hospitals are generally classified as either not-for-profit or for-profit. Whereas many NFP hospitals receive tax-exempt status under the federal tax code 501(c)(3), for-profit hospitals do not receive tax benefits. Many policy issues are raised with regards to NFP obligations to charity care. If NFPs are expected to provide hospital care to patients, similar to the son of John Q. Archibald, the question of whether they are giving back sufficiently to the community to justify their tax-exempt status is raised. Furthermore, have the requirements for NFP status been lowered to such an extent that it gives them an economic advantage over the for-profits, who are also expected to provide various community services under federal law? In response, Nesvisky argues that "Statistics indicate that the amount of uncompensated care provided by NFP and for-profit (FP) hospitals is comparable in similar social and physical environments__ [On] average, NFP hospitals tend to treat slightly less difficult cases than FP hospitals. Such findings suggest that for-profit hospitals deserve attention when they claim tax-exemption spells unfair advantage for NFP's in the market place" (2004). The tax-exempt status has evolved through court action over several years. A recent case that involved the prominent Utah health maintenance organization (HMO), Intermountain Health Care (IHC), in IHC Health Plans, Inc. v. Commissioner of Internal Revenue (Nos. 01-9013 to 01-9015), defined the qualifications of a tax-exempt entity (IHC Health Plans v. CIR 2003, 1188). The respondent, Commissioner of Internal Revenue (CIR), defined a charitable institution as one that "serves a public rather than a private interest" (IHC Health Plans v. CIR 2003, 1194). A level of quid pro quo reciprocity is expected of a charitable organization in exchange for its tax-exempt status. The most essential criterion in granting tax exemption is to determine if a hospital operates for those unable to pay for services and not exclusively for those who are able and expected to pay. Current 501 (C)(3) Requirements NFP organizations today are required to adhere to a less restrictive rule in order to maintain tax exempt status. The respondent in IHC Health Plans v. CIR stated, "Difficulties will inevitably arise in quantifying the required community benefit. The governing statutory language, however, provides some guidance. [A]n organization is not enti- 25 |