Healthcare Administration

More or less by default, many hospitals have left their charity care policies to be determined by financial managers. However, with state and federal regulators taking a hard look at whether hospitals are earning their tax-exempt status, this approach won't cut it anymore, says attorney T.J. Sullivan, a partner with Drinkler Biddle & Reath. Sullivan, who spoke at the VHA Inc's national conference in Denver this week, noted that federal legislators are challenging the basis for many hospitals' tax-exempt status.

What's more, a number of states--notably Illinois--are taking an aggressive stance on the tax-exemption issue. To address this problem, everyone involved in a hospital's management has to take part in setting community benefit policies, she says. "It has to be elevated to a board level, and all of your senior executives have to be involved," she said. "It can't just be the finance people."

These execs can take a number of steps to make sure their tax-exemption remains intact, she said. These include making sure the value of your community benefits at least matches whatever profits you show, assessing charity care value at cost to avoid claims of price-related inflation and touting the benefits you provide in the media to avoid perceptions that you aren't doing enough. She also recommended that hospitals team up with local advocacy organizations, which could become friends rather than critics if you demonstrate that you're really making a community impact. Meanwhile, hospitals should brace themselves for the installation of a new IRS commissioner, which could change federal income tax exemption policy for hospitals in unpredictable ways, she warned.

To learn about this issue:
- check out how the Michigan Hospital Association pitched its members' community contributions

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