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Show Burdens Encountered By the Uninsured in the Search for Hospital Care: Are Tax-Exempt Hospitals Fulfilling Their Charitable Obligations: Jennifer M. Lambert tied to tax exemption unless it operates for a charitable purpose. Thus, the evidence of some incidental community benefit is insufficient. Rather, the magnitude of the community benefit conferred must be sufficient to give rise to a strong inference that the organization operates primarily for the purpose of benefiting the community" (italics in original) (IHC Health Plans v. CIR 2003). Moreover, "under section 501(c)(3), a healthcare provider must make its services available to all in the community plus provide additional community or public benefits" (IHC Health Plans v. CIR 2003, 1198). In February 2001, the Internal Revenue Service (IRS) recognized the need for clarification of requirements of tax-exempt hospitals; therefore, the IRS "issued a 'field service advice' memo on the charity care obligations of nonprofit hospitals" (Hodin 2001). Portions of the "field service advice" memo were published by Community Catalyst, entitled "Hospital Charity Care/NonProfit Status: Internal Revenue Service Issues Guidance on Nonprofit Hospitals' Charity Care Obligations" (Hodin 2001). The Community Catalyst reports: "In the memo, the IRS advises its field agents that hospitals may be required to demonstrate that they provide charity care in order to retain their tax-exempt status. According to the memo, 'a hospital's mere assertions that it has a policy to provide health care services to the indigent is not sufficient to establish that the hospital meets the charity care requirement of the community benefit standard. Instead, the hospital also must show that it actually provided significant health care services to the indigent (italics added within text).' The memo then provides fourteen questions that IRS agents should ask a nonprofit hospital in order to ascertain whether and to what extent it provides charity care, including: Does the hospital broadcast the terms and conditions of its charity care policy to the public? Does the hospital maintain and operate a full-time emergency room open to all persons regardless of their ability to pay? What inpatient, outpatient, and diagnostic services does the hospital actually provide to the poor or indigent for free or for reduced charges?" (Hodin 2001) While these guidelines indicate the level of charity care required for tax-exempt status, many hospitals have not adhered to, and continue to ignore the advisory guidelines. They struggle to provide, at minimum, four percent of their total revenue in charity care, which is needed to maintain tax-exempt status. According to a report published by Community Catalyst (2003), many not-for-profit hospitals are not giving back to the community because many low-income individuals who utilize hospitals are not made aware of various programs to help them receive care or pay medical bills. According to Don Mantyla, a Certified Public Accountant and President of Mantyla, McReynolds and Associates CPAs, a tax-exempt entity may save roughly forty percent in tax exemptions. Simply stated, for every one dol- lar in net income, an organization would likely pay 40 cents in taxes. In addition, an exemption for state property taxes can be estimated at another five percent of net income (Mantyla 2004). However, it must be noted that these figures are an estimation of possible tax savings, and not a certification of savings; they may also not apply to every tax-exempt organization, but are a general estimate. Recognizing the tax savings received from claiming 501 (c) (3) status is key in debating how much charity care a tax-exempt entity, particularly a hospital, should provide, and if current practices are enough. As to the amount of community care provided by NFPs, statistics are difficult to come by. Dr. Anthony Tersigni, CEO of Ascension Health, a large national hospital chain, testified before a congressional subcommittee that his company's mission is to "serve those who are poor and vulnerable" (U.S. House Energy & Commerce Subcommittee Hearing 2004)-Ascension spent $500 million in 2003 in charity care and community benefits. He assured the House Energy and Commerce Subcommittee that the company will write off hospital charges to the indigent that are at or above the federal poverty level (FPL), although he did not specify the exact percentage above the FPL (U.S. House Energy & Commerce Subcommittee Hearing 2004). Similarly, Mr. Fetter of Tenet Healthcare confirmed that Tenet does provide an uninsured discount program that offers a price discount, similar to those negotiated by HMOs for their members, to the uninsured (U.S. House Energy & Commerce Subcommittee Hearing 2004). Hospital Billing Practices Although all hospitals are required to provide emergency room service to anyone seeking medical attention in an emergency under the 1986 federal law EMTALA (Emergency Medical Treatment and Active Labor Act), NFP and for-prof-it hospitals have recently come under scrutiny for their unfair hospital billing practices toward hospital patients, including ER patients, which inflates the costs of hospital services (Centers for Medicare & Medicaid Services (CMS) 2004)-As stated previously, 501(c)(3)s are required to fulfill certain charitable obligations in exchange for the tax benefits they enjoy. They are required to not only provide free and discounted care to qualifying individuals, but to make their various programs known to all prospective patients. Uncompensated Care and Inflated Hospital Rates 501(c)(3)s are required to disclose the amount of charity care they provide each fiscal year. However, what is defined as charity care has become a point of controversy due to uncompensated care. Uncompensated care, also known as "bad debt," is care for which the hospital was unable to receive payment, and ultimately writes off the outstanding charges. It is argued if uncompensated care should be configured with other charitable activities, since it was not initially intended as charity care. Because uncompensated care is the result of 26 |
