May 16, 2012 12:12 ET

VHA Calls for Simplification of Burdensome Hospital Tax-Exempt Status Regulations

Schedule H Needs Streamlining to Reduce Redundant and Overly Prescriptive Requirements

WASHINGTON, DC--(Marketwire - May 16, 2012) - Irving, Texas-based VHA Inc., the national health care network, provided expert testimony to the Oversight Subcommittee of the House Ways and Means Committee today that the Internal Revenue Service Schedule H amendment and informal guidance place overly burdensome requirements on nonprofit hospitals, redirecting scarce resources away from meeting their communities' most pressing health needs.

"VHA supports efforts to make the tax code fairer, simpler and more efficient," said Michael Regier, senior vice president of legal and corporate affairs, general counsel and compliance officer for VHA Inc. "Even tax-exempt organizations spend millions of dollars to comply with IRS documentation and filing requirements. It's imperative to find that 'sweet spot' where the IRS can effectively perform its important oversight function while not requiring unnecessary paperwork."

In the Affordable Care Act, Congress codified some of the specific community benefit obligations of tax-exempt hospitals. However, implementation of these new requirements needs to be streamlined and simplified. In particular, Schedule H, with its mix of compliance inquiries and informational questions, is redundant and overly prescriptive.

For example, Schedule H mandates a community health needs assessment every three years with what Regier suggests are overly prescriptive procedural requirements. These include requiring health systems to issue separate reports for each hospital instead of a system-wide report; mandating that hospitals consult with public health agencies and specific populations with chronic health needs; imposing excessive documentation; and, going beyond the statute to require that hospitals attach a copy of their reports as opposed to reporting how they are addressing the health needs identified by their assessments.

VHA has long promoted community benefit obligations to its nonprofit hospitals. Since the 1990s, VHA has collaborated with the Catholic Health Association to establish community benefit reporting guidelines, tools and best practices. VHA will now work to facilitate hospitals full compliance with the IRS requirements, which include:

  • Conducting a community health need assessment at least once every three years

  • Adopting and publicizing a financial assistance or "charity care" policy

  • Limiting hospital charges for medical care payable by individuals qualifying for financial assistance, and

  • Refraining from taking "extraordinary" collection actions before making reasonable efforts to determine whether the patient qualifies for financial assistance.

Regier told the committee that given the resource challenges and increasing community health needs that nonprofit hospitals face, Congress should avoid taking any action that would jeopardize the three core benefits: 1) income tax exemption for charitable hospitals, 2) tax-exempt financing for hospital facilities and 3) deduction of charitable contributions and bequests for hospital donors.

According to a recently released study by Ernst & Young conducted for the American Hospital Association, nonprofit hospitals spend an average of 11.3 percent of their total expenses on benefits to their communities.

"Nonprofit hospitals play a critical role in ensuring the health of the communities they serve and more is being asked of them every day because of the growth in the uninsured and underinsured populations," said Regier. "We are asking Congress to ensure new requirements are not unduly burdensome and do not go beyond Congressional intent. We have to keep in mind that the work of these charitable organizations contributes significantly to the public good and lessens the burden of government."

About VHA Inc.
Based in Irving, Texas, with a public policy office in Washington, D.C., VHA Inc. is a national network of more than 1,350 nonprofit, community-based health care organizations and more than 30,000 non-acute care providers nationwide. VHA works together with its members to set new levels of clinical performance and identify and implement best practices to improve operational efficiency and clinical outcomes. Since 1977, VHA has leveraged its expertise in analytics, contracting, consulting and networks to help members achieve their operational, clinical and financial objectives. VHA has been ranked as one of the best places to work in healthcare by Modern Healthcare since the publication introduced this list in 2008.

Contact Information

  • VHA Media Contact:
    Suzanne Cottraux
    Vice President, Communications
    Email Contact