Schedule H

IRS releases instructions for new Form 990

Anne Zieger — Wed, 20 Aug 2008 01:17:39 -0400

The IRS has released new instructions for the Form 990 form used by not-for profits to report financial performance and detail charitable activities. This version of the form comes as the result of an update that improved and expanded executive compensation and disclosure details. The new form also requires hospitals to report free and discounted care and other subsidized services on a related questionnaire, Schedule H, which is intended to create a national standard for disclosing community benefits and hasn't existed until this point. Important changes incorporated in the new document include rules narrowing the definition of key employees whose compensation details must be reported, including employees with more than $150,000 compensation, those who have influence comparable to an officer or board member, and those who are among the 20 highest-paid employees. The new form also clarifies that physician clinics and skilled-nursing facilities are eligible to be classified as subsidized health services.

To learn more about the update:
- read this Modern Healthcare article

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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)

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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:
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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.)

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Ratings firms slam nonprofit hospital finances. Financial ratings report
Officials say 'prove it!' on charity care. Charity care report