Senators Warren, Grassley and others taking bi-partisan action to address business practices of non-profit hospitals

American Hospitals: Healing a Broken System, a documentary I helped produce, premiered in Washington on March 29. One of the main points of the movie is that many nonprofit tax-exempt hospitals are sitting on piles of cash, but few are filling their legal obligation to spend appropriate amounts of money to improve the health and well-being of people in the communities they serve. 

For more than half a century, federal law has required nonprofit hospitals to devote sufficient revenues to “community benefit” initiatives. To maintain their tax-exempt status, nonprofit hospitals must provide “benefits to a class of persons that is broad enough to benefit the community.” More recently, the Affordable Care Act of 2010 required nonprofit hospitals to complete a community needs assessment every three years. It also banned discrimination and predatory billing practices.

The government has established several metrics to assess and measure the value of a hospital’s community benefit efforts. But as researchers at the Lown Institute reported earlier this year, 77% of more than 1,700 hospitals they evaluated spent less on charity care and community investment than the estimated value of their tax breaks. (Among those featured in the movie are Vikas Saini, MD, president and CEO of the Lown Institute, and Shannon Brownlee, special advisor to the Institute.)

I’m happy to report that the film has helped to get some of Washington’s most prominent lawmakers to pay more attention to what is happening in the hospital business and to hold massive hospital systems more accountable. 

Last week, a bipartisan group of influential senators–Charles Grassley (R-Iowa), Elizabeth Warren (D-Massachusetts), Bill Cassidy (R-Louisiana), and Raphael Warnock (D-Georgia)–sent a letter to the IRS and Treasury Department calling on both agencies to more clearly define community benefit and to enforce the law. 

“We are alarmed by reports that despite their tax-exempt status, certain nonprofit hospitals may be taking advantage of this overly broad definition of ‘community benefit’ and engaging in practices that are not in the best interest of patients,” the senators wrote. “These practices–along with lax federal oversight–have allowed some nonprofit hospitals to avoid providing essential care in the community for those who need it.” They noted that many hospitals were including spending on administrative functions that should not have been allowed under the community benefit standards.

As the movie shows, many tax-exempt hospitals hold billions of dollars in reserves and are using revenues from patients, the government and private insurers to build expensive facilities in rich neighborhoods while shuttering hospitals that serve rural areas and poor urban communities and devoting unlawfully low amounts to help poor people get the care they need and to improve community health. 

And, as the movie and the senators make clear, some of those same hospitals are aggressively pursuing payment from poor patients that should be eligible for charity care.

Grassley in particular has been focused on making nonprofit hospitals change their behaviors and business practices. Last December, he sent a letter to the Comptroller General of the United States calling attention to an investigation he conducted when he chaired the Senate Finance Committee. That investigation, like the one conducted by the Lown Institute, found a number of nonprofit hospitals “were not meeting their legal obligations to provide charity care and financial assistance as tax-exempt, nonprofit hospitals.”

The letter that he and his three Senate colleagues sent last week called on the Treasury Inspector General for Tax Administration and the IRS to evaluate the hospitals’ compliance with federal requirements and to provide information on their oversight efforts. It also called on government officials to more clearly define what hospitals should be allowed to include in their community benefit efforts. 

We’ll let you know when Treasury and IRS officials get back to the senators and keep you posted on this evolving issue. We’ll also let you know when our movie is available for private screenings later this summer. You can watch the trailer here.