Grassley Writes Pointed Letter About Hospital System’s Community Benefit Level

Presenters/Authors
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On October 17, 2019, Sen. Chuck Grassley wrote a letter to representatives at a large nonprofit hospital system. In the letter, Grassley referred to reports issued in Kaiser Health News and The Washington Post that point out certain billing and collection practices exercised by the system. A full copy of the letter can be accessed on Grassley’s website.

Grassley is the current chair of the Senate Finance Committee, his third stint serving on the committee. He has a history of being particularly interested in the level of community benefit being provided by the approximately 3,000 nonprofit organizations. He also has led investigations into billing practices that resulted in millions of dollars being refunded to patients who were eligible to receive financial assistance.

501(c)(3) tax-exempt hospitals are subject to the regulations outlined in 501(r). These require tax-exempt hospitals to (1) meet community health needs assessment requirements, (2) maintain financial assistance policies, (3) limit amounts charged for medically necessary care provided to individuals eligible for financial assistance and (4) refrain from extraordinary collection actions against patients before making reasonable efforts to determine if those patients are eligible for financial assistance.

In Grassley’s letter, he points out claims from the reports alleging the hospital wasn’t meeting its community benefit requirements as a tax-exempt hospital. Grassley asks several questions about the hospital’s practices, many of them relating to how the hospital is complying with 501(r) requirements. He also reviewed the standard pricing list for hospital supplies and asked several questions about how they determine those prices.

This letter is a reminder for nonprofit hospitals that the Senate Finance Committee will continue to be interested in their operations. The IRS will review each hospital’s Form 990 and website every three years at a minimum. In February 2019, Grassley wrote a letter to IRS Commissioner Charles Rettig requesting results of examination and compliance check efforts from the past several months. His concern was based on reports that tax-exempt hospitals have cut charity care levels despite increasing revenue.

Hospitals should regularly monitor their policies and website to stay compliant with 501(r) rules. Now that final regulations have been issued for several years, the IRS has shifted from education to enforcement and begun assessing more penalties and revoking tax exemptions. As the IRS performs reviews at least every three years, nonprofit hospitals should actively comply with the regulations to increase the likelihood of a favorable situation. For questions, requests or additional information, reach out to your BKD trusted advisor or use the Contact Us form below.

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