MHA's Executive Briefing

OMB urged to evaluate burden of proposed IRS rule on hospitals

The American Hospital Association on June 3 urged the Office of Management and Budget to evaluate the time commitment and commensurate costs imposed on hospitals by a notice of proposed rulemaking issued by the Treasury Department and Internal Revenue Service to implement new requirements for tax-exempt status under the Patient Protection and Affordable Care Act.

“We appreciate the important improvements the agencies made in this NPRM to the prior guidance regarding Section 501(r)(3) issued in Notice 2011-52,” wrote Melinda Reid Hatton, AHA senior vice president and general counsel. “However, many of the requirements continue to be extremely detailed and in some instances very prescriptive.”

The letter urges OMB to review the comments AHA will submit to the IRS “as evidence of improvements that can be made to reduce the burden while achieving the goals of Section 501(r)(3), to which the AHA remains fully committed.”

AHA to Congress: IRS should adhere to Administrative Procedures Act

The current community benefit standard for hospital tax exemption, which allows the community in which a hospital operates to determine the needs of its residents and the hospital to tailor its activities accordingly, “still works well for communities across the nation,” the American Hospital Association told the House Ways and Means Committee’s Working Group on Charitable and Exempt Organizations in comments submitted April 15. Congress and the courts “have examined, refined and affirmed hospital tax exemption” since the 1960s, and “decades ago rejected setting a percentage of charity care as a condition for hospitals’ gaining or maintaining tax-exempt status,” AHA wrote.

However, AHA urged the committee to consider a proposed amendment to Internal Revenue Code section 6033 that would require the Internal Revenue Service to adhere to the Administrative Procedures Act and Paperwork Reduction Act. The proposal “would rectify the IRS’ lapse in process for issuing informal guidance that binds tax-exempt organizations without any formal opportunity for input,” and “ensure public participation and transparency in the IRS’ process for issuing new or materially amended forms to collect information from tax-exempt organizations,” AHA said.

IRS issues proposed rule on reporting requirements for charitable hospitals

The Internal Revenue Service on April 3 released a proposed rule that provides guidance to charitable hospital organizations on the community health needs assessment requirements, and related excise tax and reporting obligations, enacted as part of the Patient Protection and Affordable Care Act. These proposed regulations also clarify the consequences for failing to meet these and other requirements for charitable hospital organizations.

Hospitals must conduct a community health needs assessment at least once every three years and adopt an implementation strategy to meet the community health needs it identified through the assessment. For more information on specific provisions of the proposed rule, see the Treasury Department fact sheet.

The agency noted that it intends to finalize its new proposal in conjunction with finalizing a June 2012 proposed rule relating to financial assistance and emergency care policies, charges for certain care provided to individuals eligible for financial assistance, and billing and collections. The proposed rule will be published in the April 5 Federal Register, and comments will be accepted for 90 days.  

AHA urges Congress to preserve access to tax-exempt financing

The American Hospital Association on April 1 urged Congress to preserve non-profit hospitals’ access to tax-exempt financing. “The ability to obtain tax-exempt financing and to accept tax-deductible charitable contributions are two key benefits of hospital tax-exemption that work to make access to hospital services available where needed,” AHA said in a statement to the House Committee on Ways and Means for a recent hearing on tax reform.

AHA noted that hospitals provide billions of dollars annually in uncompensated care to patients, as well as “programs and other activities designed to promote and protect their health and well-being,” including medical research and education, emergency and trauma services and disaster response readiness. “At a time when hospital revenues are already strained, hospitals must respond to rapidly changing market and government forces, including: (1) reimbursement reductions and changes, (2) an increasing necessity to provide access to a broad range of health services to a growing population, and (3) limited access to capital,” AHA said. “These market forces are driving an urgent need for hospitals to make significant capital investments while reducing costs, both of which require continued access to low-cost capital through tax-exempt financing.”

AHA Legal Advisory: Updated Schedule H and instructions for 2012

Last month, the IRS released an updated 2012 Schedule H for hospitals and related instructions to be completed as part of the hospital’s federal 2012 tax year return. The American Hospital Association has published a Legal Advisory highlights the changes of particular interest for hospitals.

The most noteworthy change is that for Part V, Section B, hospital organizations with multiple facilities are now permitted to file a single Section B for their hospital facilities that have identical answers. This change, which had been proposed by the AHA, may reduce some of the burden of completing Schedule H for hospitals with multiple facilities.

If you are an MHA member and would like a copy of the advisory, email Shawn Rossi at srossi@mhanet.org.

Webinar reviews certain ACA requirements for tax-exempt hospitals

A new webinar from the American Hospital Association's Center for Healthcare Governance reviews the Patient Protection & Affordable Care Act's new requirements related to community health needs assessment, and the board's role in implementing these new requirements for hospital tax exemption. Available free to all AHA members at www.americangovernance.com/policy, the webinar includes key compliance and strategic planning questions for trustees to consider, a board action checklist, and sources for additional information on hospital tax-exempt status.

The webinar is part of CHG’s Health Care in Transition education series, which brings the AHA's policy expertise and center's educational expertise to bear on critical policy and regulatory issues for trustees.

AHA testifies on proposed IRS rule for charitable hospitals

At an Internal Revenue Service hearing on Dec. 5, an American Hospital Association witness highlighted four concerns with the agency’s proposed rule implementing requirements for tax-exempt hospitals under Section 501(r) of the Patient Protection and Affordable Care Act.

“The AHA and its members support Congress’ goals in enacting Section 501(r), and hospitals are committed to meeting its requirements,” said Andreanna Ksidakis, vice president, Office of the General Counsel at Sutter Health in Sacremento, CA. “The AHA’s comment letter and my remarks reflect input from hospitals across the country of all sizes, types and locations, including a member advisory group I had the privilege of leading in 2011 that represented over 300 hospitals. The message we uniformly heard was: one size does not fit all; do not interrupt what’s working; and focus on transparency and disclosure to the community.”

The AHA recommended that: the definition of “reasonable efforts” be changed to eliminate the overly prescriptive requirements; the effective date of the final regulations coincide with implementation of other key features of the Patient Protection and Affordable Care Act; enforcement guidance be issued prior to finalizing the regulations; and the final rule accommodate the unique circumstances of government hospitals that are 501(c)(3) organizations.

IRS reschedules hearing on proposed charitable hospital requirements

The Internal Revenue Service has rescheduled to Dec. 5 a hearing on its June proposed rule implementing certain requirements for tax-exempt hospitals under the Patient Protection and Affordable Care Act. The hearing was originally scheduled for Oct. 29.

The American Hospital Association recently submitted comments on the proposed rule and plans to participate in the hearing. Separately, the IRS' Exempt Organizations division is asking more than 2,000 randomly selected central (parent) organizations to complete a compliance check questionnaire about their group exemption, including their relationship with subordinate organizations and how they satisfy their exemption and filing requirements.

AHA, IRS discuss need to update rules hampering efforts to transform care

At a meeting on Oct. 9 with senior Internal Revenue Service officials, American Hospital Association representatives continued to press the agency to modernize tax-exempt bond rules that hamper hospital efforts to engage in cooperative arrangements with physicians and other providers. Stressing the penalties hospitals face for failure to meet new requirements of the Patient Protection and Affordable Care Act, hospital representatives urged the IRS to quickly issue new guidance that removes hurdles to implementation of innovative new hospital, physician and other provider arrangements under private-use rules for health care facilities financed with tax-exempt bonds.

The meeting follows an AHA letter to IRS Commissioner Doug Schulman in May, which outlined barriers to integration imposed by the IRS rules. AHA continues to welcome comments from hospitals affected by the restrictions imposed by IRS Revenue Procedure 97-13; contact Mike Rock at mrock@aha.org.

IRS sets hearing on tax-exemption regulations

The Internal Revenue Service has set an Oct. 29 hearing date to discuss regulatory changes regarding not-for-profit hospitals' tax-exempt statuses. Read more from Modern Healthcare here.