IRS Investigating Level of Support for Non-Profit Tax Status

It is my experience having worked with many hospitals in the past that non-profit hospitals, in particular, not only actually give back to their communities but that hospital staff are proud of the level of giving. But Senator Charles Grassley has been challenging the tax advantages that non-profit hospitals receive for the exchange. There might be a few who would fail to meet the standard, but putting everyone through a witch-hunt to find these few seems wrong-headed.

The IRS study found that hospitals give back 9% of their total revenues on providing community benefits, including free medical care, education and research.

The real issue is that Congress nor the IRS have clearly defined what a community benefit is — and that is a good thing. The Federal Government sitting in Washington are a far distance from most of the hospitals serving local communities. The staff of these hospitals, being part of their communities, know best how to provide benefit to improve the health of area citizens.

I suspect that Senator Grassley wants a single measure — free care for the uninsured. But even if this were the single standard and even if Congress completely ignored all the other ways hospital employees, still most hospitals would pass this test. Non-profit hospitals give so much free care that this is at least one of the reasons so many operate in the red.

Can hospitals do better? Of course, we can all do better. But using a bully club of IRS threats to withdraw tax benefits to struggling hospitals just seems to me to be the wrong way to achieve anything positive.

Filed Under: Financial Performance