IRS Releases Long-Awaited Report on Hospital Pay and Services
IRS officials said in an interview that, among the 15 percent of hospitals that did not use the rebuttable-presumption process, at least one hospital was found by the tax agency to have paid excessive compensation.
The IRS study also looked at how nonprofit hospitals are following the current “community benefit standard,” which the tax agency uses to determine a hospital’s eligibility for tax-exempt status. Under a 40-year-old IRS ruling, hospitals must show that they provide benefits to the people and neighborhoods in the region they serve.
“Uncompensated care was the largest reported community benefit expenditure for each of the study’s demographics, other than for a group of 15 hospitals reporting large medical-research expenditures,” the IRS said. The IRS questionnaire was sent to hospitals in the 26 largest urban areas; other urban and suburban hospitals; and two types of rural hospitals.
“Over all, the average and median percentages of uncompensated care as a percentage of total revenues were 7 percent and 4 percent respectively,” the tax agency said. ““Uncompensated care accounted for 56 percent of aggregate community benefit expenditures reported by the hospitals in the study.”
The IRS said the next largest categories of community benefit expenditures were for medical education and training, research, and community programs.
“No correlation was found between community benefit expenditure levels and per capita income levels of the hospital’s surrounding area,” the IRS said. “However, community benefit expenditure levels generally increased as uninsured rates of the hospital’s surrounding area increased.”
The IRS said the data on community benefits has limitations. “For example, although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the [hospitals’] discretion,” the tax agency said.