Defining Community Benefit
Originally posted 2008-09-13 12:33:46 -0500. Promoted. -- GH
Current law requires hospitals to satisfy the community benefit standard in order to qualify as tax-exempt charities under section 501(c)(3). The Hospital Compliance Project (the Project) was initiated in 2006 by the Internal Revenue Service (IRS) to study nonprofit hospitals and community benefit, as well as to determine how hospitals establish and report executive compensation. [IRS: Hospitals and Community Benefit - Interim Report (30 Jul '07)]
In the late '50's the criteria for maintaining tax exempt status included a requirement that hospitals serve any patient coming through the emergency room doors. Over the course of the past roughly 50 years that requirement has been steadily chipped away, leading hospitals to charges and counter-charges of - among other things - "patient dumping". From Atlanta:
"These other hospitals are [nonprofit] tax-exempt organizations, and both the state and federal government are giving them tens of millions of dollars in tax breaks,” he said. He declined to identify any hospital.
How did this happen? The easy way.
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Follow the bouncing ball
At the beginning of the process is usually a group screaming "there oughta be a law". Let's say we're that group. We discover we have an incredible amount of research-in-common, so we proceed to become lobbyists - advocates - for "The Fix". Over the course of a couple of years we communicate with our respective Congress-critter's staffers, point to the pothole in existing law, show them the proposed fix, and offer to provide any further background information they may need to bolster the case for enactment. We compile a list of experts in the field who are willing to contribute directly to the cause by writing and/or appearing before committees; we work the phones and the wire to increase awareness; and eventually that work results in a piece of paper with either an "S. XXXX" or "H.XXXX" submitted for approval by the Congress.
Now all we have to do is babysit the thing each and every time it comes before as many as ten committees. Because they all agree that we've drafted the "cleanest" law of our time, they will not change so much as punctuation marks, but will pass it out on a unanimous vote. We are happy, and very, very lucky. Staying with that fantasy we're more than pleased when the bill slides into the omnibus something-or-other and is signed into law by the Prez'. Oh joy-of-joys.
It's only taken five years over two sessions, through three agency administrators, with a different party in power than when we started. But we're tough. Now, all our reduced crew of frazzled near-burnouts need to do is keep watch on the agency's efforts to make sense of what Congress has writ. Somehow they must translate the intent of the law into a series of regulations implementing the mandates built into the "fix". Once more into the breach come our experts who have (not coincidentally) drafted a set of very fine-and-dandy regs. The agency experts agree with our experts and the proposed regulatory schematic is posted in the Federal Register for the required open comment period. Lucky again, the regs are adopted without change.
We are joyful, as are our grandchildren, born at the time we began this difficult journey, now married with children, who directly benefit from the "fix". Easy money? Um, no.
It is at precisely this point that the people who were unhappy with our "fix", begin to quietly challenge the placement of the word "is" in the text of the regulations. A mere administrative error, they say. Nothing to be worried about. Tut, tut, it's only a small change. After our long journey some amongst us decide to let the challenge go unchallenged. After all, it is such a small thing. Yet they come back every year to challenge every provision's effect on their particular herd of oxen. Eventually the original intent of the "fix" is subsumed into a (now) much larger series of regulations so complex it takes the agency months to determine definitions of commonly accepted terms.
Like the meaning of "community benefit".