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Taking nonprofit hospitals to tax

Helen Palmer Jul 23, 2007


Lisa Napoli: Nonprofit hospitals are excused from paying taxes because they’re supposed to treat the poor and uninsured free, or at reduced rates. But a new IRS report shows that over 20 percent of hospitals spend less than 1 percent of their revenue on charity care.

Helen Palmer reports from the Health Desk at WGBH that lawmakers and the IRS want tougher standards.

Helen Palmer: To earn tax-free status, hospitals need to deliver “community benefit.” The American Hospital Association’s Melinda Hatton says they deliver plenty of that.

Melinda Hatton: The public in rich countries don’t see it. They don’t see the cheaper goods they buy. All they see is that their pay and their jobs are under threat from poorer countries like China and India.

Hatton says the IRS report doesn’t take bad debt into account — that’s patients who can’t pay their bills. Or the fact that government programs like Medicaid underpay hospitals.

But Jim Unland of the Journal of Health Care Finance says for-profit hospitals also face these problems, and the rules for tax-exempt hospitals need to be tighter.

Jim Unland: The definition of charity care needs to be tightened up into measuring actual dollars in charity, as opposed to vague community benefits.

The IRS has developed a new tougher tax form for nonprofits, demanding much more detail. Meantime, lawmakers say a minimum of 5 percent of revenue should go to charity care.

In Boston, I’m Helen Palmer for Marketplace.

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