Hospitals Tackle New Tax Forms on Louisiana Medical News

Hospitals Tackle New Tax Forms

By: TED GRIGGS

Not-for-profit hospitals face much more detailed federal tax forms for 2008, and the reporting requirements will grow more arduous for 2009, when one schedule will actually include an essay question.

Schedule H of Form 990 will ask hospitals to describe how they assess the healthcare needs of the communities they serve. The essay question is part of the first non-profit tax form overhaul in 30 years. The more detailed form resulted in part after some members of Congress criticized nonprofit hospitals, saying they provided no more charitable care than their for-profit counterparts.

However, Patricia "Tatsy" Jeter, senior vice president and chief financial officer of the Louisiana Hospital Association, said Schedule H will give hospitals the chance to show how much they contribute to the community.

"Hospitals provide a tremendous amount of benefits to the community, from health screenings to shots to going out to schools," Jeter said, "benefits that many in the community are not aware of."

Many people don't realize how much uncompensated care hospitals provide, such as unreimbursed care for Medicare or Medicaid patients and bad debt, Jeter said.

The new tax forms basically give hospitals another forum to validate the valuable services they provide to the community, she said.

A Government Accountability Office report shows that nonprofit hospitals received $12.6 billion in tax benefits from state, local and federal governments in 2002. And the Senate Committee on Finance has estimated the tax benefits could be worth as much as $20 billion.

Meanwhile, the GAO said there are essentially no federal standards that define the "community benefit" hospitals must provide to earn their non-profit status. Hospitals are allowed broad latitude to determine the services and activities that constitute community benefit, according to the GAO.

U.S. Sen. Chuck Grassley, R-Iowa, has been a vocal critic of the non-profit hospitals. Grassley has proposed that not-for-profit hospitals meet minimum levels of charitable spending to keep the tax exemptions. Among other things, Grassley has suggested hospitals dedicate five percent of annual revenues to charity care.

Meeting that requirement may not be a problem for Louisiana hospitals, which had some of the highest uncompensated care costs in the country even before Hurricane Katrina, according to the American Hospital Association.

Since the 2005 storms, Louisiana hospitals have reported staggering numbers for uncompensated care.

The five largest hospitals in the New Orleans area lost $386 million between 2005 and 2007, according to New Orleans CityBusiness.

A 2007 LHA-commissioned report shows the state hospitals employed close to 102,000 people and had payrolls of more than $3.5 billion.

Jeter said she does not know whether Congress plans to use the overhauled Form 990 or Schedule H to set guidelines for charitable care.

But the hospital association and its members are embracing the added accountability and transparency, Jeter said.

According to the IRS, that added transparency will require hospitals to spend more time filling out their tax forms.

The new Form 990, which has 16 schedules, will take a lot more time to fill out, Jeter said. But hospitals are pretty organized, with good financial support systems, and the healthcare providers should be able to cope.

In addition, most of the information for Schedule H is not required in the current Form 990.

While many hospitals keep track of that data — the charity care, bad debt expense, Medicare revenues and cost – other parts of the schedule may require hospitals to establish or modify their recordkeeping systems, the IRS said.

"The additional burden could be substantial for many hospitals, particularly for the first year of reporting," according to the IRS.

The American Hospital Association and the LHA are recommending that members do a trial run of Schedule H.

Jeter said the practice will help hospitals get a better grasp of what numbers go on what line, what exactly needs to be reported, and what the IRS is looking for from a compliance standpoint.

"It's like when you do your own tax return," Jeter said. "It's always the first year that's most difficult, and if you have to file that same schedule the next year it's easier."

The Schedule H for the 2009 tax year requires hospitals to answer a number of questions, including:

Does the organization use Federal Poverty Guidelines to determine eligibility for providing free care to low income individuals?
Does the organization use Federal Poverty Guidelines to determine eligibility for providing discounted care to low income individuals?