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

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Currently, nonprofit hospitals don't have to pay federal income tax, state sales tax or locaol property tax. In return, they must provide a community benefit. But political pressurr from Congress has causedr the to take a close look at exactly how nonprofit hospitals provides thatcommunity benefit. The IRS sent out surveys last year to544 tax-exemptr hospitals on the types of community benefit they provide. The interim report is expected next with the completed one due inSeptember 2008.
Little difference The report comes at a time whensome -- includiny Ashley Johnson, chief financial officer for the for-profig in Sanford -- question whetherd nonprofits differ enough from for-profit hospitals to justifyh their tax-exempt status. In fact, the biggesr difference she can point to is simplythat for-profitd pay taxes and nonprofits don't. Johnsobn says Central Florida Regional Hospital, which is ownede by the privatelyheld Nashville, Tenn.-based , also provides charity In addition, she says for-profit hospitals are undef many of the same pressuress such as dealing with bad debt and absorbing shortfalls from Medicared and Medicaid.
For Central Florida Regional, which serves abouty 10,000 inpatients a year, provided nearly $4.2 million in charith care for 2006 andabsorbed $23 million in bad in addition to paying nearly $1.2 million in taxes. "I don' understand why we have to pay when we're under the same criteria and the same says Johnson. But for nonprofits, that fault-findingf sounds familiar. "Twenty yearsx ago, nonprofits were criticize d severely for not running enougblike businesses," says Rich Morrison, ­regional vice president for .
"Now 20 years later, we're bein criticized for being too business-like and A major focus of the IRS reportt is charity care and how hospitalsdefinew that. For example, some hospitalw count bad debt ascharity care, while others There are also disagreements over whethert to count both Medicare and Medicai shortfalls, or costs exceeding reimbursement, as charity care. Medicaidd and Medicare reimbursements typically cover only abougt 70 percentof costs, says Morrison. Both for-profiyt and nonprofit hospitals havethese shortfalls, whicb can add up to big bucks.
For Florida Hospital had $30 million in unreimburse costs associated with Medicaidand $88 million in unreimbursedd costs from Medicare. The includesa Medicaid shortfalls in its definition of charity but not Medicare shortfalls or bad saysDonald Stuart, an attorney with in Nashville. On the othedr hand, the includes all unreimbursed shortfalls and bad debt in its definitiojn ofcharity care, says Stuart. "Nobody has been able to come up with a standards measurement to report charity Many are speculating on the local implicationsd of theIRS report. On the extreme the IRS could take away the says Stuart.
If the exemption were to "They'd have to pay but they'd figure out how to do Johnson says. However, Stuart predictw the IRS simply will createw a uniform definition of charity care andcommunith benefit, or a clearer standards on how to repor that. "Everyone needs to work off the same says Morrison. "If we have consistent information, a lot of thesse questions willgo away.
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