March 23,2010

Grassley’s Provisions for Tax-exempt Hospital Accountability Included in New Health Care Law


To: Reporters and Editors
Re: tax-exempt hospitals provisions in new health care law
Da: Wednesday, March 24, 2010

Sen. Chuck Grassley, ranking member of the Committee on Finance, withjurisdiction over taxes, has worked to hold tax-exempt hospitals accountable for thefederal tax benefits they receive. The health care legislation signed into law yesterdayincludes provisions Grassley co-authored to impose standards for the tax exemption ofcharitable hospitals for the first time. The bill requires that a hospital complete acommunity needs assessment once every three years and adopt and publicize a financialassistance policy; prohibits billing those who qualify for financial assistance the top rates;and prohibits a hospital from taking extraordinary collection actions if the hospital hasnot made reasonable efforts to notify patients of its financial assistance policy. The billalso requires the IRS to review the tax-exempt status of each hospital every threeyears; requires Treasury and Health and Human Services to submit an annual report toCongress on the level of charity care, bad debt expenses and the unreimbursed costs ofmeans-tested and non-means-tested government programs; and requires Treasury andHHS to provide a report in five years on the trends on the items reported on an annualbasis. Grassley made the following comment on the advancement of these provisions.

“Tax-exempt hospitals don’t have many measures of accountability for theirspecial status. The law hasn’t given them much direction, and so they’ve definedstandards for themselves. Sometimes that’s resulted in providing very little charitablepatient care or other community benefits, failing to publicize charitable care to patients,charging indigent, uninsured patients more than insured patients, and using veryaggressive collection practices. The Government Accountability Office and others,including the former IRS commissioner, have said for a long time that there is often nodiscernible difference between the operations of taxable and tax-exempt hospitals. Thesenew provisions are modeled after principles and polices that the Catholic HealthAssociation has had in place for years. I appreciate the association’s willingness to havehonest, forthright conversations about charitable hospitals’ activities. The provisions takesteps to differentiate tax-exempt hospitals from for-profit hospitals and provide furthertransparency about tax-exempt hospitals’ fulfilling their charitable mission. Congress,the IRS, and the public will now have additional tools and information to ensure thatcharitable hospitals act charitably.”

The provisions enacted in the new health care law are the result of Grassley’sleadership on tax-exempt organizations’ accountability and transparency, includinghospitals. In 2005, he sent letters of inquiry to some of the nation’s largest tax-exempthospitals. In 2006, he convened a hearing and released a summary of the hospitals’responses. In 2007, he released a staff discussion draft of potential legislative reformsand convened a roundtable of experts to discuss the potential reforms. In 2008, hefollowed up with letters of inquiry to more hospitals and received a report he’d requestedfrom the Government Accountability Office. In 2009, he drafted legislative reforms andsucceeded in persuading the Democratic majority to include several of the reforms in thenew health care law.