IRS eyes nonprofits — EDs can play key role
IRS eyes nonprofits — EDs can play key role
Much of mission to serve community resides in ED
ED managers may find themselves in the spotlight as the Internal Revenue Service (IRS) has renewed its commitment to scrutinize not-for-profit organizations, which include a large number of hospitals. Consider these remarks from Sarah Hall Ingram, commissioner of tax-exempt and government entities, when speaking in June at the Georgetown University Law Center's continuing legal education organization:
"Our creation of the ROO [Review of Operations, established in 2004] and the Exempt Organizations Compliance Area, together with the new Form 990 [which was strengthened this year,] creates compliance opportunities and choices we didn't have before," said Ingram. "We are better able now to detect and follow up on actions by organizations that are questionable or that appear to violate the [IRS] code."
In addition, Ingram said that IRS agents will be taking a harder look at potential violations. "We are going to start asking agents, at the end of each examination, to fill out a check sheet about certain of the examined organization's governance practices and internal controls," Ingram noted. "The check sheet is intended to identify instances of noncompliance found during the exam and also to gather information about whether the organization had, and used, any internal controls."
What does all this have to do with ED managers? Quite a bit, actually, say the experts. "EDs play an important role in the hospital maintaining its [not-for-profit] status in that they do so much for the community in the way of taking care of all patients who present there, many of whom either don't have insurance or are underinsured," notes Michael D. Bishop, MD, president and CEO of Unity Physician Group, a Bloomington, IN, firm that staffs hospital EDs in Indiana and Kentucky and owns and operates urgent care centers in Indiana. "That helps hospitals maintain their tax-exempt status because they are doing their community service," he adds.
Other observers point out that EDs also report on how the hospital serves the community and justifies its nonprofit status, by providing data on occurrences of services, the costs of those services, and how they generate admissions to the hospital. Mark E. Moore, MHA, FACHE, the CEO of Bloomington (IN) Hospital, says, "All of that has relevance and import to not-for-profit status. There is no question that when you look at the total volume of care given, it is integral to admission of not-for-profit status."
That role takes on even greater importance when you consider the ramifications for a hospital that loses its non-profit or tax-exempt status. Bishop says, "If you lose your status and have to pay taxes on 'profits,' in round numbers, you'd be looking at a 35% corporate tax bracket, so that means one-third less to invest in capital equipment and ongoing operations within the hospital."
Moore says, "If you lost your status, it would mean higher costs for patients, because you now pay property taxes, as well as corporate taxes. There is also a subtle impact in terms of your mission-mindedness and possible losses of services."
Vital to report your services
What can the ED manager do to help ensure his or her hospital keeps that status? One of the most important areas, says Moore, is reporting. "Make sure your services are a key component in your community benefit reporting, that you are tallying and capturing the information in an understandable fashion that you can reduce to [the lay level] and really communicate to the community," he advises. "If you happen to run an ambulance or helicopter service, be sure to communicate that. It needs to be demonstrated."
Bishop says, "What we have to do, and occasionally the hospital will ask us to, is look at whether the amount of free care is based on the cost of providing service or the charge of providing service." Those are different, he says. "If you're the IRS, you have to look at what it's costing you to provide the service, not what you charge, because charges are unrelated to cost — especially for physicians," Bishop says.
Teach staff about not-for-profits EDs play a key role in helping not-for-profit hospitals maintain their status, and ED managers can strengthen that role by involving their staff, says Mark E. Moore, MHA, FACHE, CEO of Bloomington (IN) Hospital. "Certainly you must make sure your services are comprehensive and your reporting is transparent, but you should also make sure you are telling that story to your own staff," Moore advises. "Part of the mission of the ED manager [of a nonprofit hospital] is that the staff need to understand and feel good about and promote that message, both internally and externally." Sometimes you might think you've done your job by capturing a significant amount of data, he says. "But you might omit something by not fully passing [the mission] along to your staff," Moore says. This should be done as part of orientation and on an ongoing basis at staff meetings, he emphasizes. In addition, says Moore, "ED physicians can often be great spokespeople out in the community." Most organizations have speakers' bureaus that provide speakers for community events, he says. "The ED manager should encourage his folks to be on the bureau," says Moore. "There's a great deal of interest in emergency services in the community." He notes that it's important to help the community understand the scope and level of service the ED can render. "They can help them understand where the ED falls in terms of trauma level designation and where to go for what kinds of conditions," he adds. "For example, you can say, 'If you have chest pain and your regular hospital does not have a cath lab, please come here.'" It's also important, for the community to understand about not-for-profit status and your facility's mission of service, he says. |
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