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Senator Pushes Accountability for Nonprofit Hospitals

Dec 18, 2008 | Parker Waichman Alonso LLP

Nonprofit hospitals could face more accountability for fulfilling their charitable missions under a new law Sen. Charles Grassley (R-Iowa) is thinking about introducing.  Nonprofit hospitals hold tax exempt status in return for providing care at free or reduced care for those who need it.  But recently, some nonprofit hospitals have taken steps to reduce such care, even as they continue to benefit from tax exemptions.

Over the past several months, The Wall Street Journal has published a series of articles on non-profit hospitals' quests to increase revenues.  The reports detail not only the aggressive practices they employ to squeeze payments out of those unable to afford it, but their quests to increase profits through special programs, such as transplant programs.

According to Fiercehealthcare.com, Grassley had earlier brought up the topic of nonprofits at a Senate Finance Committee hearing this past summer. At the hearing, a 53-year-old leukemia patient testified about her experience with the M.D. Anderson Cancer Center, which demanded a total of $105,000 in cash up front before it would provide chemotherapy.

According to The Wall Street Journal, Grassley's proposed legislation would, among other things, require nonprofit hospitals to spend a minimum amount on free care for the poor and limit executive compensation.  Nonprofit hospitals would face penalties - including losing their tax exempt status - if they failed to comply.

According the Journal, legislation isn't Grassley's first choice for forcing nonprofits to fall in line.  He would like the Treasury Department to reinstate charity-care requirements that were undone by the IRS in 1969.  But the Journal said the senator is ready to introduce a bill in the first quarter of 2009 if that doesn't happen.

The Wall Street Journal reported that in the past, Grassley's staff has said nonprofit hospitals should spend at least 5% of their patient revenue on charity care. However, there is no indication of what threshold would be required under any new law.