• Health Care Reform and Tax Exemptions
  • February 3, 2012 | Author: Tiffany Kouri Spinella
  • Law Firm: Pullman & Comley, LLC - Hartford Office
  • In 2007, the Internal Revenue Service noted that approximately 50 percent of all nonprofit hospitals spent 3 percent or less of their gross revenues on charity care while at the same time paying their executives handsomely and vigorously chasing patients who could  not pay their bills.

    The Patient Protection and Affordable Care Act (PPACA) addresses some of these concerns.  For example, hospitals can not charge indigent patients "more than the amounts generally billed to insured patients . . ."  Among other objectives, this rule will make it more difficult for hospitals to claim high levels of charity care when they write off inflated bills to low income individuals.

    "Extraordinary collection actions,” a term to be defined, may not be pursued until the hospital knows whether a patient is eligible for financial assistance.

    Hospitals must promulgate a financial assistance policy that includes a procedure for patients to apply for help.  What will these requirements accomplish?

    Critics suggest that PPACA does not do much to change existing practices and that not-for-profit hospitals need to do more.  For example, they argue that hospitals should look out for their communities by adopting measures to improve the health of an area's population rather than addressing charitable goals through individual care.

    Given litigation which seems to pop up frequently concerning the interpretation of the charity care rules currently in place through the Internal Revenue Service, the new requirement of PPACA that tax-exempt hospitals prepare an assessment of community health needs at least every three years is a promising development.