Nonprofit hospitals get help to avoid community health needs penalties

Nonprofit hospitals could get leeway concerning community health needs assessment (CHNA) requirements, thanks to a newly proposed rule from the Internal Revenue Service that will excuse minor and inadvertent omissions and errors.

For errors above the level of minor and inadvertent but below willful or egregious, hospitals can avoid the excise tax if they correct and appropriately disclose the errors when they occur.

"The Treasury Department and the IRS recognize that minor and inadvertent errors may occur even in circumstances in which a hospital facility has practices and procedures in place that are reasonably designed to facilitate overall compliance," the proposed rule states.

The proposed rule also offers hospitals some guidance on how to define the community they serve and assess the health needs of that community to meet the Affordable Care Act's requirements.

The IRS says nonprofits can consider what geographic area and target populations they serve, what particular specialty area or targeted disease they focus on, as well as populations from their entire metropolitan statistical area of collaborating hospital facilities.

The new rule could be welcome news to hospitals, which have been vocal with their criticism of the ACA's financial assistance and charity care requirements to maintain tax-exempt status. Last fall, the American Hospital Association urged the Department of the Treasury and IRS to give hospitals flexibility to meet new tax-exempt rules, rather than following prescribed uniform regulations.

The future of nonprofit hospitals is in doubt, thanks to changes under health reform, Lexology reported. Their survival depends on whether they can meet the four new requirements to maintain tax exemptions or go extinct as for-profit health systems continue to buy them up.

For more:
- read the IRS proposed rule (.pdf)
- check out the ACA requirements
- here's the Lexicology article