Nonprofit hospitals face scrutiny

Billing and debt-collection practices raise concerns in Congress


WASHINGTON -- Congressional leaders, concerned that many nonprofit hospitals are not providing enough charity care to justify their tax-exempt status, say they will set standards for the industry if it does not do so itself.

Senate Finance Committee Chairman Charles E. Grassley, an Iowa Republican, is examining nonprofit hospitals with an eye to legislation that would clarify standards for their tax exemptions. House Ways and Means Committee Chairman Bill Thomas, a California Republican, began investigating the financial practices of nonprofit hospitals last year.

The commissioner of the Internal Revenue Service, Mark W. Everson, said tax officials often found little difference between nonprofit and for-profit hospitals "in their operations, their attention to the benefit of the community or their levels of charity care."

Huge changes have reshaped the health care industry in recent years, Everson said, but the basic standard for granting tax exemptions to hospitals has changed little since 1969.

Thomas said that since 1969, "less and less has been required for hospitals to maintain tax-exempt status."

Before 1969, the IRS required hospitals to provide charity care to qualify for tax-exempt status. Since then, the agency has not required such care, as long as hospitals benefit the community in other ways - for example, by offering health fairs, screening for cancer and cholesterol, providing emergency care, training doctors and conducting medical research.

Insurers typically negotiate with hospitals to secure discounts. Uninsured people are often charged much more, and some hospitals have been aggressive in trying to collect payment from the uninsured.

In a letter March 14 to the American Hospital Association, Grassley said he had "serious concern" about billing and debt-collection practices.

He also expressed concern about the high salaries of some executives, their joint ventures with commercial organizations and their use of profit-making subsidiaries.

In the past few years, low-income people around the country have filed dozens of lawsuits arguing that private nonprofit hospitals are required to provide free or reduced-price services to the uninsured. Judges have generally rejected these arguments.

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