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IRS rolls out not-for-profit reporting rules

January 8, 2008 — 7:59am ET
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Like it or not, it seems that new IRS rules on not-for-profit reporting are about to arrive. The rules, which will go into effect this year and next, will force not-for-profit hospitals to provide a great deal more information on their governance structure, executive pay and perks and perhaps most controversially, how much subsidized and free care they provide. The reporting will be detailed in a supplement (Schedule H) to the IRS's Form 990, which is used both in and outside healthcare by not-for-profits to report revenue and expenses. The idea is to make sure that hospitals report their financial policies and condition, and justify their tax-exemption, on a uniform basis.

While many industry organizations are comfortable with the new requirements, some are upset that bad debt and Medicare losses, while listed, are not counted as community benefits. Not only that, hospitals aren't pleased that if they want to claim bad debt or Medicare losses, they must disclose the method they used to come up with this estimate. 

Perhaps the hottest potato of all is community benefit reporting. The new form breaks down such reporting into eight expenses, including charity care, cash and in-kind contributions to community groups, community health improvement, professional education, research, subsidized health services, un-reimbursed Medicaid and other public, means-tested programs and a catch-all "other benefits" category. Some industry players complain that comparing community benefit from one organization to another could be problematic, given how differently they may be structured. Maybe future IRS form adjustments will address this--but it looks they'll have to live with things as is for the time being. Time for some creative accounting, folks?

To learn more about the rules:
- read this Modern Healthcare article (reg. req.)

Related Articles:
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AHA charity proposal draws Congressional criticism. Report
IRS says 'uncompensated care' definition is dicey. Report
IRS to investigate nonprofit hospitals. Report
Proving community benefit by reducing sickness. Report
A critical time to prove community benefit. Report
A new standard for voluntary hospitals? Report
VHA: Charity policy must come from the top. Report

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By Anonymous | Posted 4:28pm | January 8, 2008

Some tax exempt organizations have been abusing their not for profit status for years.(www.wherethemoneygoes.com) No doubt, those that do will continue to find a way, because it is such a lucrative practice. Also, when you get right down to it, what does the IRS care? They don't get any money from not for profits anyway. Still, such public disclusure of information has potential to make the arrogant tax exempt hospitals (you know which ones you are) somewhat more accountable to the public they profess to serve. It's a start.

By Bobcat | Posted 11:35pm | January 11, 2008

I can understand the parameters for non for profit hospitals;which is set up by internal revenue. Firstly, each proposal which is targetted to obtain grant monies must be specific to the need of the grant and to the non for profit hospital.
On the other hand, citizens have been writting proposals to councilmembers; to obtain street names, but the coucilmember is not in charge of changing street names, planning is.
Therefore, the internal revenue organization is adding specific rules, so non for profit hospitals can match the need with the grant. Secondly, medicare pays only 80% of the cost. However, the non for profit hosptial may not do the financial billng for patients. A larger organization might have a accounts payable department, acccounts receivable department and customer service. The application used may be the Eagle software. This means that the billing for patient care can be transferred about 6 times before the bill gets paid by medicare.
Hopefully, medicare and departments for patient billing will micromange the medicare accounts, so that consistent and effective billing can begin?

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