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Baucus Bill Imposes Additional Tax Burdens on Nonprofit Hospitals

September 16, 2009, Caplin & Drysdale

FOR IMMEDIATE RELEASE
September 16, 2009

CONTACTS: Heather Maurer, (202) 862-7857
                  Ufuoma Otu, (202) 449-9804

Baucus Bill Imposes Additional Tax Burdens on Nonprofit Hospitals
Magnifies financial and administrative strain for nonprofit hospitals in
period of limited resources; potentially impact services and cost to consumers

Washington, D.C.September 16, 2009 – Senator Baucus released the details of the proposed Senate health care plan, America’s Healthy Future Act of 2009, which would create new and onerous requirements applicable to nonprofit hospitals starting in 2010. According to the provisions, every nonprofit hospital would be required to conduct a community health needs assessment at least once every three years, and then adopt an implementation strategy to ensure that the nonprofit hospital will meet the identified needs. Failure to complete the study in any three year period would result in a penalty on the nonprofit hospital of up to $50,000, while failure to disclose the implementation strategy would subject the nonprofit hospital to monetary penalties for filing an incomplete Form 990.

“This community health needs assessment requirement imposes additional administrative burdens on the nonprofit hospital community,” says Nancy Ortmeyer Kuhn, an attorney who specializes in exempt organizations at Caplin & Drysdale, “especially at a time when nonprofit hospitals are dealing with the added complexity and reporting requirements of the newly revised Form 990 and Schedule H.”

If this legislation is passed, the nonprofit hospital community will be burdened with assessing all of the needs of the community and justifying their decisions to address only certain needs. This justification will be required to not only satisfy the IRS in order to avoid penalty taxes, but also satisfy the public since the study and response are public documents. Whether this will cause nonprofit hospitals to alter or increase their provision of healthcare to the community remains to be seen. “It could potentially increase cost to consumers and decrease the provision of healthcare since so many resources will be consumed by these administrative burdens,” says Ms. Kuhn.

The bill is scheduled for markup by the Senate Committee on Finance on September 22, 2009.


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