Grassley proposes changes for nonprofit hospitals

Sen. Charles Grassley, who often tries to do the right thing if somewhat laboriously in tax policy, has released a "discussion draft" of potential reforms in the tax-exempt hospital sector. Among the several proposed reforms are quantitative standards of charity care, as well as establishment of a more general charity care policy, for hospitals qualifying under sec. 501(c)(3), and the somewhat more nebulous requirement of "community benefit" for 501(c)(4) entities. There would also be new requirements regarding board composition, executive compensation, and billing of charges to the uninsured.

Living in a family with one tax and one health policy expert, I can tell you that the "charitable" hospital sector is in need of some reform. While once required to provide a significant amount of genuine charity care, such hospitals were successful in essentially eliminating this requirement during the 1950s and 1960s, so that--in most instances--the provision of an emergency room open to the public is enough to satisfy the Code requirement and qualify for tax exemption. While many hospitals do more than that, others do not, and some manage to locate themselves in places that make even the emergency room requirement have little if any meaning.

Here's hoping the Grassley proposals are a first step toward clearing up a situation in need of it.