IRS Begins Audit of Not-For-Profit Hospitals
The Internal Revenue Service has sent "compliance check questionnaires" to 550 not-for-profit hospitals to determine whether they "are flouting standards for tax-exempt status, whether they deny care to people without insurance and whether they provide significant amounts of charity care," the New York Times reports.
Lois Lerner, director of the exempt organizations division of the IRS, said the agency is seeking to understand whether standards set for not-for-profit hospitals in 1969 -- which require the hospitals to provide "community benefits," such as cancer screenings and health fairs -- should be updated to include more detailed information on hospital care. Lerner also said that questionnaire responses could lead to formal audits of some facilities, with full examinations of their records.
The 80-question survey queries hospitals on topics such as whether their emergency departments ever deny care to people who request it and how many patients receive uncompensated care, among other issues.
IRS Commissioner Mark Everson said the agency's audit rate of not-for-profit health care organizations is "too low." There are about 7,000 not-for-profit hospitals in the U.S., about 375 of which have been audited in the past 10 years, the Times reports.
Timothy Sullivan, a tax lawyer who previously worked at the IRS, said the distribution of the surveys shows that the agency has "a need for greater monitoring of what hospitals do in return for their tax exemptions."
Sen. Charles Grassley (R-Iowa) said, "Asking questions is not enough. The IRS and the Treasury need to take action. They need to use information from the survey to support changes to the current regulation." He added, "Too many do little to nothing. Too often, it seems that tax-exempt hospitals offer less charitable care and community benefit than for-profit hospitals."
However, Melina Hatton, vice president of the American Hospital Association, said the current standard "recognizes the incredible diversity of tax-exempt hospitals serving communities with different needs -- remote rural areas, suburban bedroom communities and downtown neighborhoods with large numbers of immigrants and working poor" (Pear, New York Times, 6/19).