Urges Firm Federal Standards for Free Care and Other Community Benefits

Boston, MA, December 20, 2007.  Community Catalyst, a national consumer health advocacy organization, reacted to today’s release of the new tax form 990, calling the development a “positive step in the right direction.”  The Internal Revenue Service (IRS) released the redesigned Form 990, which is filed annually by nonprofit institutions, and a new “Schedule H” to be completed by hospitals.  Community Catalyst has historically backed efforts to hold hospitals more responsible for reporting on and providing care to un- and underinsured individuals.

In September, the group, along with twenty state and national organizations, issued comments to the IRS citing the importance of the new reporting requirements for nonprofit institutions and called for additional transparency so that the public can fully understand whether nonprofit hospitals are living up to the high standards their tax-exempt status merits.

“Nonprofit hospitals receive over $12 billion each year in tax breaks.  We believe that they should be straightforward about the specific financial assistance programs and community benefits provided in exchange for these breaks,” said Renée Markus Hodin, Project Director at Community Catalyst.  “Though it does not include all that we and other advocates asked for, the new Schedule H goes a long way toward shining some light on nonprofit hospitals’ activities.”

Community Catalyst pointed to a number of new requirements that may be particularly valuable in promoting greater transparency among nonprofit hospitals, including:

  • A greater level of detail about a hospital’s financial assistance policies and eligibility criteria; 
  • Standardized reporting for free care and community benefits, as well as bad debt and Medicare shortfalls;
  • A description of the ways in which hospitals notifies patients about the hospital’s free care policies and public programs such as Medicaid;
  • A connection between a hospital’s community-building activities and the promotion of health; and
  • Detail about the community the hospital intends to serve and how it assesses the needs of that community.

However, the group also criticized several very significant aspects of the new Schedule that they maintain are key factors in determining whether a hospital is fulfilling its obligations as a tax-exempt organization.  These include: 

  • Allowing hospitals the opportunity to mischaracterize bad debt as a community benefit;
  • Eliminating important billing information that would allow communities to assess how hospitals serve all classes of patients, including the uninsured, who are often billed at a rate three times of other payers; and
  • Delaying of the reporting requirements until 2009 (filed in 2010).

In addition, Community Catalyst raised a fundamental and longstanding concern about the continuing lack of standards to which hospitals are held.  “While the new reporting requirements are welcome news, there is still much more to be done.” added Hodin. “At the end of the day, there are still no firm standards on the level of community benefits a hospital must actually provide in order to earn its federal tax exemptions.  It is our hope that that the IRS and Congress will soon come up with a long overdue remedy to this glaring omission.”

View the complete comments submitted to the IRS in September.

About Community Catalyst
Community Catalyst is a national non-profit advocacy organization dedicated to quality affordable health care for all.  Since 1997, Community Catalyst has been working to build the consumer and community leadership required to transform the American health system.  With the belief that this transformation will happen when consumers are fully engaged and have an organized voice, Community Catalyst works in partnership with national, state and local consumer organizations, policymakers, and foundations, providing leadership and support to change the health care system so it serves everyone—especially vulnerable members of society.  For more information, visit www.communitycatalyst.org.