Senate Finance Committee Chairman Chuck Grassley (R-IA) renewed his focus on charitable hospitals by asking the IRS on February 19, 2019, for data on hospital compliance with § 501(r) of the Internal Revenue Code.  Section 501(r) imposed additional requirements on charitable hospitals as a condition of their tax-exempt status, such as assessing the health needs of their communities, implementing a financial assistance policy, limiting charges to patients who qualify for financial assistance and undertaking reasonable efforts before engaging in extraordinary collection efforts.  Citing media reports from 2017, Senator Grassley expressed concern that at least some charitable hospitals had cut charity care, despite increased revenue, and had failed to satisfy the standards § 501(r) imposed.

Senator Grassley previously sent a letter to the IRS in February 2018 inquiring about charitable hospital compliance with § 501(r).  In April 2018, the IRS informed Senator Grassley that it annually reviews approximately one-third, or 1,000, of the 3,000 tax-exempt hospitals per year.  These examinations included a review of the hospitals’ Forms 990, including the information they report with respect to § 501(r) on Schedule H, as well as the hospitals’ websites and other information.  The IRS then assigns either a compliance check or examination to those hospitals that appear to be most at risk for noncompliance.

In his February 19, 2019 letter, Senator Grassley asks for seven categories of information from the IRS in an effort “to ensure the Internal Revenue Code is enforced vigilantly.”  He seeks information regarding how many additional charitable hospitals the IRS has reviewed since its April 2018 response to Senator Grassley’s prior letter, as well how the IRS determines if a charitable hospital has widely publicized its financial assistance policy.  Senator Grassley notes that a charitable hospital must make a reasonable effort to determine if a patient is qualified to participate in financial assistance programs before taking extraordinary collection action against the patient, and he wants to know what efforts the IRS has taken to enforce this regulation. 

Senator Grassley has asked the IRS to respond to this letter by April 1, 2019.  The full text of Senator Grassley’s letter can be found here.