The first round of IRS Form 990 submissions can be confusing for hospitals, with the definitions of what is considered charity care or community benefit still relatively vague, according to presenters at a pre-conference session at the Healthcare Financial Management Association’s 2009 ANI in mid-June.
The session featured tips on how to fill out the revised IRS Form 990 and walked attendees through the steps of completing the form.
“I think this form requires a community needs assessment,” said Keith Hearle of Verite Healthcare Consulting in Alexandria, Va.
The original Form 990 documents were drafted over twenty years ago, but hospitals still aren’t required to file anything but Part V and pieces of Part VI in most states. Only 15 states actually require the filing, while 23 others have a voluntary filing program for IRS Form 990.
“I feel like I’m filling out something that will get ignored,” said one skeptical conference attendee.
Charity care, covered under Line 7 of Part I of Form 990, is defined as “free or discounted health services provided to persons who meet the organization’s criteria for financial assistance and are thereby deemed unable to pay for all or a portion of the services.”
Hearle admitted that the subtotal row in Line 7 “made him nervous,” and would likely unsettle hospital officials charged with completing the form.
Hearle said three states – Texas, Pennsylvania and Utah – have minimum requirements for the amount of charity care each hospital must administer in a year.
Julie Trocchio of the Catholic Health Association warns hospitals to be careful only to report charity care that falls within their stated charity care policies.
Trocchio said IRS Form 990 was first introduced after states had problems granting hospital tax exemptions. In the mid-1980s, a Utah referendum granting tax-exemption to certain hospitals was unsuccessful because the public couldn’t distinguish between for-profit and not-for-profit hospitals.
In the late 1980s, Pennsylvania had problems with hospitals mischaracterizing charity care, while in Texas, Methodist Hospital – a highly regarded teaching and cardiac care facility – argued that it “didn’t have to serve the poor.” In response, the state’s Attorney General changed the law, requiring all Texas hospitals to provide 5 percent of their revenue in charity care, making it the toughest state law on the matter.
In order to protect themselves, Hearle said officials needed to learn the “nuances of the 990,” including all the “unexplained things.”