During testimony last week at the Oversight Subcommittee of the House Ways and Means Committee hearing, Irving, Texas-based VHA Inc., said that the Internal Revenue Service (IRS) Schedule H amendment, which regulates reporting for tax-exempt organizations, has overly burdensome requirements for nonprofit hospitals.
VHA Inc., which is the national collaborative for nonprofit healthcare organizations, said Schedule H requirements redirect scarce resources away from meeting their communities' most pressing health needs.
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"VHA supports efforts to make the tax code fairer, simpler and more efficient," said Michael Regier, senior vice president of legal and corporate affairs, and general counsel and compliance officer for VHA Inc. "Even tax-exempt organizations spend millions of dollars to comply with IRS documentation and filing requirements. It's imperative to find that 'sweet spot' where the IRS can effectively perform its important oversight function while not requiring unnecessary paperwork."
In the Affordable Care Act, Congress codified some of the specific community benefit obligations of tax-exempt hospitals. However, implementation of these new requirements needs to be streamlined and simplified. In particular, Schedule H, with its mix of compliance inquiries and informational questions, is redundant and overly prescriptive, according to Regier.
Under the ACA, Schedule H mandates a community health needs assessment every three years and requires health systems to issue separate reports for each hospital instead of a system-wide report, among other excessive documentation, said Regier.
"In particular for multi-hospital systems - they don't normally plan and report on a hospital by hospital basis. They plan and report on a hospital system basis," said Regier. "Through different payment models, the government is pushing hospitals to monitor episodes of care and manage a population's health, but many hospitals won't do this well if they are working at a hospital by hospital level for this tax exempt status."
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In addition, Schedule H mandates that hospitals consult with public health agencies and specific populations with chronic health needs; imposes excessive documentation; and, goes beyond the statute to require that hospitals attach a copy of their reports as opposed to reporting how they are addressing the health needs identified by their assessments, according to Regier.
Regier told the committee that given the resource challenges and increasing community health needs that nonprofit hospitals face, "Congress should avoid taking any action that would jeopardize the three core benefits: income tax exemption for charitable hospitals; hospital's ability to use tax exempt bonds for financing; and deduction of charitable contributions and bequests for hospital donors.
In its April report, the American Hospital Association found that nonprofit hospitals spend an average of 11.3 percent of their total expenses on benefits to their communities.
"Nonprofit hospitals play a critical role in ensuring the health of the communities they serve and more is being asked of them every day because of the growth in the uninsured and underinsured populations," said Regier. "We are asking Congress to ensure new requirements are not unduly burdensome and do not go beyond Congressional intent. We have to keep in mind that the work of these charitable organizations contributes significantly to the public good and lessens the burden of government."
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