July 14,2006

Grassley Seeks Treasury Tax Nominee’s Commitment to Better Define Charity Hospital Care


To: Reporters and Editors
Re: Charity hospitals
Da: Friday, July 14, 2006

Sen. Chuck Grassley, chairman of the Committee on Finance, yesterday asked the following
question on charity hospitals to Eric Solomon, the administration's nominee for deputy Treasury
secretary for tax policy, at Solomon's nomination hearing yesterday. Solomon said he was
committed to working on this issue. No transcript is available but you can watch the exchange via
Realplayer on finance.senate.gov under “hearings.”

Chairman Grassley’s Question:

The IRS is engaged in a significant review of charity hospitals. They have sent out an
extensive list of questions to several hundred hospitals asking a series of questions. I’m pleased to
see this action, but I am concerned that this not be just a fact-gathering exercise. The end result
should be real changes to the requirements of charity hospitals.

I am engaged in an ongoing review of charity hospitals and it is clear that these hospitals are
all over the map when it comes to providing charity care, community benefit and charges to the
uninsured. Some charity hospitals are doing a little, some a lot and some nothing. These charity
hospitals are receiving billions of dollars each year in tax benefits – the public has a right to expect
real public benefits in return.

It is important to remember that the reason for this is that the IRS changed the rules – there
was no change in the law. The IRS in 1969 changed the rules because they listened to the lobbyists
who hoodwinked the IRS and Treasury that inability to afford medical care was a problem of the
past. Well, we are all well aware that the inability to afford medical care is very much a problem of
the present.

Mr. Solomon, it is clear that the IRS and Treasury decision to change the rules regarding
charity hospitals in 1969 was based on extremely inaccurate information.

I want your commitment that the Treasury and IRS are going to look at the real facts – that
there is a great need to help low-income people facing medical expenses – and that Treasury and IRS
are going put out new guidance during this administration that puts real teeth to charity care,
community benefit, charges to the uninsured and other important issues in this area. Poor people
shouldn’t have to suffer because Treasury and IRS got the facts wrong in 1969.

To that end – I request the following:

1) a timeline for review and proposals for reforming guidance in this area;

2) the individuals responsible at Treasury and IRS for reviewing the material submitted by
the hospitals and for drafting and reviewing new guidance;

3) a copy of all documents, memorandums, material in the possession or control of Treasury
and IRS related to the 1969 decision.

4) a copy of all submissions from the hospitals that the IRS receives as well as the names of
any hospitals that did not respond.