Charity care in nonprofit hospitals, a cornerstone of their tax-exempt status, is under increasing scrutiny from both state and federal regulators. The central question is whether nonprofit hospitals are truly providing sufficient charity care to the communities they serve in exchange for their significant tax breaks. While many hospitals meet minimum requirements, there are concerns that some may fall short, potentially failing to justify their tax-exempt status.
What Is Charity Care?
Charity care refers to free or reduced-cost medical services provided to patients who cannot afford to pay. Nonprofit hospitals are expected to deliver a certain amount of charity care as part of their mission to serve the public good. This care is critical for low-income populations who rely on nonprofit hospitals for access to essential health services.
Why Is Charity Care Under Scrutiny?
The New York Attorney General’s Office, in partnership with Congress and state bodies, has turned its attention to whether nonprofit hospitals are providing enough charity care. This concern has sparked initiatives within the National Association of State Charity Officials (NASCO), a network of state charity regulators. NASCO has formed a policy committee that is collaborating with states to develop ways to evaluate and enforce charity care obligations.
The Growing Role of State Governments
State governments are increasingly involved in reviewing charity care practices, with several launching investigations into whether hospitals are meeting their obligations. In some states, nonprofit hospitals are required to report how much charity care they provide as part of their Form 990 tax filing obligations, but there is still significant variation in how charity care is measured and enforced.
What This Means for Nonprofit Hospitals
For nonprofit hospitals, the stakes are high. Failure to provide adequate charity care could lead to a loss of tax-exempt status, increased regulation, or legal action. As states and Congress ramp up their focus on this issue, nonprofit hospitals must ensure they are transparent about their charity care practices and align their services with the communities’ needs. Further, nonprofit hospitals should take special care to present their charity care on their Form 990 as the Form 990 is a key tool for state regulators evaluating whether nonprofit hospitals’ exemptions are justified.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.