Sen. Grassley Calls for More Scrutiny of Not-for-Profit Hospitals' Community Benefits after Release of GAO Report

According to Senate Finance Committee ranking member Charles Grassley (R-Iowa) not-for-profit hospitals have too much flexibility in defining the "community benefits" they are required to provide to maintain tax-exempt status. Grassley’s comments were based upon the recent Government Accountability Office report that noted that the "determination and measurement of activities as community benefit for federal purposes are still largely a matter of individual hospital discretion." In addition, variations in what not-for-profit hospitals define as a community benefit "lead to substantial differences in the amount of community benefits they report," according to GAO. The report states that even when hospitals define the same activities as providing a community benefit, "they may measure the costs of these activities differently, which can lead to inconsistencies in reported community benefits."

Grassley said the report "makes clear that tax-exempt hospitals are free to define community benefit as they see fit. While the definition is vague, hospitals are left to fill the void. Ten different hospitals will give 10 different answers." Grassley would like the Internal Revenue Service to determine whether hospitals are meeting the standard necessary to maintain their tax exemption. Grassley hopes to introduce legislation in the next Congress that would create such a test. The American Hospital Association believes such legislation is not necessary because the IRS new reporting schedule will clarify the contributions made by not-for-profit hospitals through community benefit activities.

To view the GAO report go to http://www.gao.gov/products/GAO-08-880