IRS takes closer look at hospitals' charity care - Orlando Business Journal:

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Currently, nonprofit hospitals don't have to pay federal incom tax, state sales tax or local property tax. In they must provide a community benefit. But politicall pressure from Congress has caused the to take a closee look at exactly how nonprofi hospitals provide thatcommunity benefit. The IRS sent out surveysx last year to544 tax-exempt hospitals on the typeas of community benefit they provide. The interin report is expectednext month, with the completed one due in Septemberf 2008. Little difference?
The report comesx at a time whensome -- includintg Ashley Johnson, chief financiao officer for the for-profit in Sanford -- question whether nonprofits differ enough from for-profit hospitalsx to justify their tax-exempt status. In fact, the biggest differencre she can point to is simplythat for-profit s pay taxes and nonprofits Johnson says Central Floridaq Regional Hospital, which is owned by the privately held Tenn.-based , also provides charit y care. In addition, she says for-profit hospitald are under many of the same pressures such as dealin with bad debt and absorbing shortfallsz from Medicareand Medicaid.
For Central Florida Regional, which serves about 10,000 inpatients a provided nearly $4.2 million in charit y care for 2006 andabsorbed $23 million in bad debt, in additioh to paying nearly $1.2 million in taxes. "I don't understanc why we have to pay [taxes] when we'r under the same criteria and thesame pressures," says But for nonprofits, that fault-finding sounds familiar. "Twenty years ago, nonprofits were criticized severel for not running enoughlike businesses," says Rich Morrison, ­regionapl vice president for . "Now 20 years we're being criticized for beintgtoo business-like and profitable.
" A major focus of the IRS reportf is charity care and how hospitals define that. For example, some hospitalss count bad debt as charity whileothers don't. There are also disagreementsa over whether to count both Medicare andMedicaid shortfalls, or costxs exceeding reimbursement, as charity care. Medicaide and Medicare reimbursements typically cover only abougt 70 percentof costs, says Morrison. Both for-profif and nonprofit hospitals havethese shortfalls, which can add up to big For 2006, Florida Hospital had $30 million in unreimbursed costs associated with Medicaid and $88 million in unreimbursed costs from Medicare.
The includes Medicaide shortfalls in its definition ofcharity care, but not Medicarer shortfalls or bad debt, says Donald Stuart, an attorney with in On the other hand, the includesz all unreimbursed shortfalls and bad debt in its definition of charitgy care, says Stuart. "Nobody has been able to come up with a standarcd measurement to reportcharity care." Many are speculating on the locakl implications of the IRS report. On the extreme side, the IRS coulxd take away the exemption, says Stuart. If the exemptioh were to disappear, "They'd have to pay but they'd figure out how to do it," Johnsonb says.
However, Stuart predicts the IRS simply will create a uniforjm definition of charity care andcommunity benefit, or a clearer standardz on how to report "Everyone needs to work off the same says Morrison. "If we have consistent information, a lot of theser questions willgo away."