Do nonprofit hospitals deserve tax exemptions?

Not-for-profit hospitals in California could get new regulations to qualify for tax exemptions after reports released last month questioned whether the nonprofits provide enough charity care to justify their tax-exempt status, the Ventura County Star reported.

According to the Institute for Health and Socio-Economic Policy, the research arm of the California Nurses Association, the state's nonprofit hospitals deliver minimal levels of charity care to indigent patients, often at levels below their for-profit counterparts. Moreover, the reports also revealed aggressive debt collection methods, substantial financial reserves and million-dollar executive paychecks at not-for-profits, noted the County Star.

However, hospitals blasted the findings as biased and defended their compensation packages as necessary recruiting tools. Critics of standardized charity care guidelines also noted that hospitals will have to deliver varying amounts of uncompensated care, depending on geography, according to the article.

In California, federal and state law don't require nonprofit hospitals to provide certain amounts of charity care and community benefits to qualify for tax exemptions, although in Illinois, hospitals get clear criteria for charity care and tax exemptions, thanks to legislation signed into law in June.

As expected, some nonprofits don't favor charity care and community benefit requirements under the Patient Protection and Affordable Care Act. The hospitals complained to the Office of Management and Budget that the regulations meant to communicate financial options to uninsured or underinsured patients are too burdensome, according to an American Hospital Association letter late last month.

For more:
- read the Ventura County Star article
- here's the AHA letter to the OMB (.pdf)