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, statd sales tax or local property tax. In return, they must provide a community benefit. But politicalk pressure from Congress has cause d the to take a closer look at exactl y how nonprofit hospitals provide thatcommunity benefit. The IRS sent out surveys last year to544 tax-exempt hospitals on the types of community benefiyt they provide. The interim report is expectesdnext month, with the completed one due in September 2008. Littlde difference?
The report comes at a time whensome -- includinvg Ashley Johnson, chief financial officer for the for-profit in Sanford -- question whethert nonprofits differ enough from for-profit hospitals to justify thei r tax-exempt status. In fact, the biggestr difference she can point to is simpl ythat for-profits pay taxes and nonprofits don't. Johnson says Centrakl Florida Regional Hospital, which is ownedx by the privatelyheld Nashville, Tenn.-baser , also provides charityy care. In addition, she says for-profiyt hospitals are under many of the same pressureds such as dealing with bad debt and absorbing shortfalle from Medicareand Medicaid.
For Central Florida Regional, which serves about 10,000 inpatientx a year, provided nearly $4.2 million in charity care for 2006 andabsorbed $23 million in bad debt, in additio n to paying nearly $1.2 million in "I don't understand why we have to pay when we're under the same criteria and the same says Johnson. But for that fault-finding sounds "Twenty years ago, nonprofits were criticized severelyu for not running enoughlike businesses," says Rich Morrison, ­regional vice presidentf for . "Now 20 years we're being criticized for being too business-liks and profitable.
" A major focuxs of the IRS report is charitt care and how hospitalsdefine that. For some hospitals count bad debt ascharity care, whilde others don't. There are also disagreementw over whether to count both Medicare andMedicaid shortfalls, or costds exceeding reimbursement, as charity care. Medicaid and Medicare reimbursements typically cover only about 70 percentof costs, says Both for-profit and nonprofit hospitals have these shortfalls, whichb can add up to big bucks. For Florida Hospital had $30 million in unreimburse d costs associated with Medicaidand $88 million in unreimbursed costs from Medicare.
The includes Medicaidc shortfalls in its definition of charity but not Medicare shortfalls orbad debt, says Donalr Stuart, an attorney with in Nashville. On the othedr hand, the includes all unreimbursed shortfallas and bad debt in its definition ofcharityy care, says Stuart. "Nobodt has been able to come up with a standarde measurement to reportcharity care." Many are speculating on the loca implications of the IRS report. On the extremde side, the IRS could take away the exemption, says If the exemption were to "They'd have to pay taxes, but they'dx figure out how to do it," Johnson says.
However, Stuart predictsa the IRS simply will create a uniform definitiom of charity care andcommunity benefit, or a clearef standards on how to report that. "Everyonde needs to work off thesame definition," says Morrison. "If we have good, consistent a lot of these questions willgo