Form 990

Case study: WY hospital expands charity care

Anne Zieger — Wed, 25 Jun 2008 01:24:53 -0400

A Wyoming hospital has expanded its charity care policy to allow more patients to qualify for free care, one of many not-for-profits taking steps to make sure they will make the right impression when they fill out their Form 990 Schedule H. Right now, Wyoming Medical Center incurs about $30 million annually in uncompensated care expenses, 80 percent of which comes from bad debt and 20 percent of which pays for charity care. Elsewhere, it's more common for there to be a 50/50 split, according to hospital CEO Nancy Brandt. To address this inequity, the hospital will now use a sliding scale when it comes to charity care, and allow patients at 200 percent or less of the federal poverty level to apply for free care. It will also let patients with income of up to 275 percent of the federal poverty level to apply for some form of subsidized care. To help facilitate the application process, the hospital is switching out its five-page application for a much simpler one-page application that is estimated to take five minutes to complete. While the previous form asked questions about patient circumstances, the new form will ask questions only related to income verification.

To learn more about the hospital's program:
- read this InsideARM article

Related Articles:
AHA says IRS form 990, Schedule H need revision
Trend: Non-profits broadening charity care access

Updates on regulatory risks

Anne Zieger — Thu, 19 Jun 2008 10:23:28 -0400

Because everyone uses healthcare, regulators take a shot at the system from time to time to prove that they're paying attention. Still, things are particularly intense this year, with tax issues and financing questions looming larger than they have before. With tax exemptions for non-profit hospitals under scrutiny, the use of tax-exempt bonds being examined, endowment use being questioned, and the ongoing carnival of changes that is Medicare reimbursement, you'll see a fair amount of discussion at the show around agency rule-making.

Among hospital types, expect to see some furrowed brows over the impending Form 990, Schedule H, in which not-for-profit hospitals will report on their charitable activities to the IRS. Given that some Congressional hospital critics, like Sen. Chuck Grassley (R-IA), have questioned whether some hospitals deserve not-for-profit status at all, filling out the Schedule H will be a high-stakes exercise. (As we've mentioned elsewhere, the June 25th educational session on how to cope with the new Form 990 is likely to be a standing-room-only affair.) Of course, the trade show exhibit floor will feature quality time with consultants like Grant Thornton, who are offering to help with the problem, too.

While you're at the show you may also wish to check out the buzz on what's happening in patient collections in your colleagues' home states--as it seems that state legislatures are pretty interested in how hospitals deal with uninsured and self-pay patients. In Illinois , for example, the legislature is considering a bill that would set limits on what hospitals would be allowed to charge and collect from some uninsured patients. And the Minnesota legislature recently passed a bill (later vetoed by the governor) that would have banned providers from collecting, using or sharing medical debt information to qualify patients prior to providing elective services. It seems likely that other states are going to get involved in these issues in coming months, too.

AHA says IRS form 990, Schedule H need revision

Wed, 21 May 2008 06:59:58 -0400

The American Hospital Association has filed a letter with the IRS arguing that the agency could do more to accommodate small, cash-strapped institutions in its instructions for filling out Form 990 and the accompanying Schedule H aimed at not-for-profit hospitals. The AHA's input comes as part of the IRS comment period on the draft instructions, which will remain open until June 1st.

In its nine-page comment letter, the AHA raised a number of concerns over core definitions. For example, it cited worries over the agency's definition of "subsidized services," which would exclude physician clinics, skilled nursing and ancillary services. The AHA argued that these services can often be part of a non-profit's charitable mission.

The AHA also cited several definitions that it considered to be too broad, including "key employee" and "facility," which it argued would result in healthcare organizations having to engage in onerous amounts of reporting which don't provide value to the organization itself.

To get more information on the AHA's critique:
- read this Modern Healthcare article (reg. req.)
- read the AHA letter (.pdf)

Related Articles:
AHA makes headway on community-benefit reporting
IRS rolls out not-for-profit reporting rules
IRS says 'uncompensated care' definition is dicey
Proving community benefit by reducing sickness

Not-for-profit financial successes raise questions

Wed, 09 Apr 2008 06:59:57 -0400

According to a December 2006 Congressional Budget Office report, U.S. not-for-profit hospitals get $12.6 billion in tax exemptions and $32 billion in federal, state and local subsidies. That's a pretty sizable chunk of change, though perfectly acceptable if the hospitals use these moneys to fulfill their charitable mission. The problem is, critics increasingly are saying it's too good--and contending that some of the hospitals seem to be spending less on charity care than they're taking in in benefits. Of late, perhaps the most vocal and visible critic has been Sen. Chuck Grassley (R-IA), who has been on a mission for years to force not-for-profits to account for themselves. He may yet succeed in his campaign to force not-for-profits to pay at least 5 percent of annual patient operating expenses or revenues to charity care.

Of course, some not-for-profits are struggling terribly, particularly those in inner cities that take in a large number of uninsured patients. However, critics are drawn to some of the more successful not-for-profit hospitals, which are raking in revenue at a rate that beats even their for-profit rivals. According to data from the American Hospital Directory, 77 percent of the 2,033 not-for-profit hospitals in the U.S. come out ahead financially, as opposed to 61 percent of for-profits. Meanwhile, according to data from the AHD, the combined net income of the 50 largest not-for-profit hospitals in the U.S. went up by a factor of 8 from 2001 to 2006, hitting $4.27 billion.

Certainly, as such hospitals begin to roll out their first Schedule Hs for Form 990, critics will at least have a better idea of where the money is going, and that will hopefully defuse some bad feelings. But in the mean time, it seems not-for-profit hospitals will have a lot of explaining to do if they're coming up with an excess income regularly. Better that than more regulations, right?

To learn more about this trend:
- read this Kaiser Daily Health Policy Report item

Related Articles:
Feds to crank up not-for-profit charity demands. Charity care report
AHA makes headway on community benefit reporting. Community benefit report
IRS to investigate nonprofit hospitals. IRS report
VHA: Charity policy must come from the top. VHA report

IRS seeking input on instructions for Form 990

Wed, 09 Apr 2008 06:59:54 -0400

As most FierceHealthFinance readers know, the IRS released a redesigned Form 990 last year. The new Form 990, which has sparked much discussion and controversy among not-for-profit healthcare organizations, includes a new schedule for hospitals (Schedule H) and tax-exempt bonds (Schedule K). Schedule H, which is likely to prove taxing to hospitals for the first year or two, requires hospitals to provide a lot of information on operations that it didn't before, including community benefit levels, charity care, aggregate bad debt expense, Medicare shortfall information and more.

Now, the IRS is asking the healthcare community to let it know whether its instructions for filling out this form, which include tools designed to make it easier to answer questions and to promote uniform reporting, are clear enough for public use. Through June 1 of this year, it's accepting comments on the draft instructions. The agency will post all comments on its website. To comment, you can email thoughts to Form990Revision@irs.gov in text form. Yeah, I know, this doesn't sound very exciting, but the truth is, if you don't like what they've got, it never hurts to declare that clearly in a public forum. Hey, sound off while you can!

To learn more about the Form 990 update process:
- read this Modern Healthcare piece (reg. req.)

Related Articles:
Trend: Non-profits broadening charity care access. Charity care report
In 2007, bad debt rising for hospitals. Hospital report
Bad debt savages HCA, LifePoint profits. HCA, LifePoint report
Bad debt hits Health Management Assoc. earnings. Health Management Associates report
Ratings firms slam nonprofit hospital finances. Financial ratings report
Officials say 'prove it!' on charity care. Charity care report

Trend: Non-profits broadening charity care access

Wed, 12 Mar 2008 07:59:58 -0400

Hoping to make a good showing when they file their first Form 990 with the IRS, not-for-profit hospitals are already beginning to make big changes to their charity care policies, according to one financial analyst. Though it will be a year or two before hospitals must file the Form 990--Schedule H, which defines and discloses their charity care spending and policies on charity and bad debt--some hospitals are already taking aggressive steps to demonstrate that they're doing the right thing. Many are lowering the threshold at which a patient can qualify for free care, according to Jeff Schaub, senior director with the Fitch Ratings public health care group. In fact, some hospitals have raised the free-care limit drastically, from 100 percent to 400 percent of the poverty level, he said. Meanwhile, it also relieves for-profits of some of their charity-care load, which could have other long-term competitive results.

All of this doesn't do much to clear up the muddy waters around the issue of what charity care really is vs. what bad debt is. It's worth noting, however, that this essentially shifts costs that would have been classified as bad debt into the charity care side of the balance sheet. The Healthcare Financial Management Association, for its part, suggests that financial execs rely on the Financial Accounting Standards Board's definitions of the two when attempting to demonstrate that they're upping charity care levels.

To learn more about this issue:
- read this InsideARM piece

ALSO: With Form 990 forcing hospitals to take a closer look at their bad debt, a great number of facilities are likely to begin selling that debt, experts predict. Article

Related Articles:
In 2007, bad debt rising for hospitals. Report
Bad debt savages HCA, LifePoint profits. Report
Bad debt hits Health Management Assoc. earnings. Report
Ratings firms slam nonprofit hospital finances. Report
Officials say 'prove it!' on charity care. Report