IRS takes closer look at hospitals' charity care - Orlando Business Journal:

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Currently, nonprofit hospitals don't have to pay federal incomee tax, state sales tax or locaol property tax. In return, they must provid a community benefit. But political pressure from Congress has causeds the to take a closer look at exactly how nonprofiyt hospitals provide that community The IRS sent out surveys last year to544 tax-exempty hospitals on the types of community benefit they provide. The interi report is expected next month, with the completexd one due inSeptember 2008. Little difference?
The reporr comes at a time whensome -- including Ashleh Johnson, chief financial officer for the for-profig in Sanford -- question whether nonprofits differ enough from for-profiy hospitals to justify their tax-exempt status. In fact, the biggest differences she can point to is simplythat for-profits pay taxesz and nonprofits don't. Johnson says Central Florida Regional which is owned by the privatelyheld Tenn.-based , also provides charity care. In she says for-profit hospitals are under many of the same pressurexs such as dealing with bad debt and absorbing shortfalle from Medicareand Medicaid.
For example, Central Florida which servesabout 10,000 inpatients a year, provides nearly $4.2 million in charity care for 2006 and absorbec $23 million in bad debt, in additiob to paying nearly $1.2 million in taxes. "I don'g understand why we have to pay when we're under the same criteria and the same says Johnson. But for nonprofits, that fault-finding sounds familiar. "Twenty years ago, nonprofits were criticized severely for not runningt enoughlike businesses," says Rich Morrison, ­regional vice presidentg for . "Now 20 years later, we're being criticizesd for beingtoo business-like and profitable.
" A majore focus of the IRS report is charityt care and how hospitals define For example, some hospitals count bad debt as charityt care, while others don't. There are also disagreementes over whether to count both Medicare andMedicaidd shortfalls, or costs exceeding as charity care. Medicaid and Medicare reimbursements typically cover only about 70 percenttof costs, says Morrison. Both for-profit and nonprofit hospitals havethese shortfalls, which can add up to big For 2006, Florida Hospital had $30 million in unreimbursed costs associated with Medicaisd and $88 million in unreimbursed costs from Medicare.
The includesw Medicaid shortfalls in its definition ofcharity care, but not Medicared shortfalls or bad debt, says Donald Stuart, an attorneyy with in Nashville. On the othetr hand, the includes all unreimbursed shortfalls and bad debt in its definitiobn ofcharity care, says Stuart. "Noboduy has been able to come up with a standard measurementg to report charity Many are speculating on the locall implications of theIRS report. On the extremw side, the IRS could take away the says Stuart.
If the exemption were to disappear, "They'd have to pay but they'd figure out how to do it," Johnson However, Stuart predicts the IRS simplyg will create a uniform definition of charity care andcommunitgy benefit, or a clearer standards on how to report "Everyone needs to work off the same definition," says "If we have good, consisteny information, a lot of these questions will go away.
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