Federal Lawmakers Call For Justification Of Tax-Exempt Status For Maryland Hospitals

February 25, 2009 at 11:00 am Leave a comment

Senate Finance Committee ranking member Chuck Grassley (R-Iowa) is considering legislation that would require Maryland hospitals to adhere to a federal standard in order to qualify for tax-exempt status as charity care hospitals, the Baltimore Sun reports. The state’s unique system for setting hospital rates is designed to allow hospitals to recoup the cost of treating uninsured or low-income patients who might be unable to pay for services received (Drew, Baltimore Sun, 2/23).

A report by the Health Services Cost Review Commission, ordered by Gov. Martin O’Malley (D) in response to a Sun series examining how hospitals in the state collect debt from low-income patients, found that Maryland law should be changed to ensure state hospitals are meeting their obligation to offer no-cost care to low-income residents. The report recommended that hospitals be mandated to offer no-cost services to all state residents with incomes less than 200% of the federal poverty level; that written notice about the availability of financial assistance be provided to all patients; and that hospitals and their collection agencies be prohibited from adding interest and penalties to bills to uninsured patients before court judgments are entered against them (Kaiser Daily Health Policy Report, 2/17). O’Malley also has recommended that hospitals in the state implement minimum standards for who is eligible for no-cost care, rather than continuing to use voluntary guidelines created by the Maryland Hospital Association.

Grassley said that he and Sen. Jeff Bingaman (D-N.M.) plan to propose legislation that would enact these changes if the Internal Revenue Service does not set a standard for charity care. According to the Sun, one proposal Grassley and Bingaman are considering would require not-for-profit hospitals to devote at least 5% of annual revenue to charity care. Maryland hospitals, all but one of which are not-for-profit, spent 2% of patient revenue on charity care in 2008, according to state data.


John Colmers, secretary of Maryland’s Department of Health and Mental Hygiene, said, “These reforms mean quality hospital care does not have to add a crushing hardship to uninsured patients or their families.” Two members of the state’s House of Delegates have proposed a bill requiring hospitals to provide no-cost care to all residents whose incomes are less than 150% of the poverty level, and state regulators have recommended a slightly higher maximum income level for eligibility.

The American Hospital Association has said that not-for-profit hospitals benefit low-income individuals more than any other sector of the health care industry and that IRS’ account of charity care and community benefits provided is too low. MHA has held that its members justify their tax exemptions in annual IRS filings, and notes that state law requires them to file annual reports with regulators on how they benefit their communities. Carmela Coyle, president of MHA said, “Charity care and financial assistance is critical, but the benefit that our hospitals provide to communities is much broader than that” (Baltimore Sun, 2/23).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

[Via http://www.medicalnewstoday.com]


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