February 05,2009

Grassley, Bingaman Seek Better Understanding of Nonprofit Hospital Charity Care

WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on
Finance, and Sen. Jeff Bingaman, committee member, are seeking to amend the
economic stimulus bill with improvements to government agency coordination on and
understanding of nonprofit hospitals’ charity care.

“I’ve been looking into nonprofit hospitals and the charity care and community
benefit they provide in return for the billions of dollars in benefits they receive under the
tax code,” Grassley said. “We need to make sure the agencies are talking to each other
so there’s consistency and accuracy in the way uncompensated care and charity care are
defined. We need to make sure taxpayers are getting their money’s worth and that
patients are getting affordable care.”

“As this economic crisis worsens and more Americans have a difficult time
paying their bills and lose their health insurance, it makes sense for us to ensure nonprofit
hospitals are providing free or reduced cost care at a level that is in-line with the
substantial benefit they receive from not paying taxes,” Bingaman said.

Grassley and Bingaman said the stimulus bill amends the Social Security Act to
provide incentive payments to hospitals that use electronic health records. The amount of
a payment to a hospital is determined in part by a hospital’s share of charges related to
charity care. The more charity care provided, then the more payment received.

The senators said they are concerned whether the Centers for Medicare and
Medicaid Services (CMS), is able to implement this payment policy in an accurate and
consistent manner. CMS collects data on the uncompensated care that hospitals provide
through Medicare cost reports. Unfortunately, this data is of limited use because of
shortcomings to the collection instrument. The Medicare Payment Advisory Commission,
or MedPAC, has pointed out numerous shortcomings with the collection instrument and
has made recommendations on making improvements. The IRS has extensively studied
the definitions of charity care and uncompensated care. The agency recently
implemented new reporting requirements for non-profit hospitals.

The first Grassley-Bingaman amendment would require CMS to coordinate with
the IRS and MedPAC and develop a single, uniform definition of uncompensated care
and charity care. This coordination would ensure consistency in reporting of
uncompensated care and charity care. It also would eliminate a burden on hospitals that
otherwise might be facing different definitions of uncompensated care and charity care
when dealing with the IRS or CMS.

The second Grassley-Bingaman amendment would require the IRS to study the
activities of for-profit hospitals, especially the amount of uncompensated care they
provide. The IRS is soon expected to release a report on the practices of tax-exempt
hospitals. Because the report is being issued by Tax-Exempt and Government Entities
Division, which only deals with nonprofit hospitals, it is not expected to contain
information about the practices of for-profit hospitals. For-profit and nonprofit hospitals
are subject to the same standards for purposes of federal health programs. Since they are
treated differently under the tax code, it makes sense that IRS should study the activities
of for-profit hospitals, especially the amount of uncompensated care they provide. This
kind of study would provide valuable information on how hospitals’ activities differ as a
result of their tax status, the senators said.