Nonprofit hospitals in Woe-town (USA Today)

An article in today's USA Today ("Scales tipping against tax-exempt hospitals") provides a laundry-list of legal challenges facing the nonprofit hospital industry. Here's the quick rundown:

•The IRS is looking at salaries paid to executives and officers of 2,000 of the nation's charities and non-profit foundations, which include hospitals. Salaries deemed “excessive” may violate federal law.

•Three congressional committees are investigating non-profit hospitals, looking at how they charge the uninsured, the tactics they use to collect unpaid bills and the amount of charity care they provide. New rules could result. Possibilities include more uniform financial reporting standards and regulations on the size and make-up of hospital boards.

•States and local property tax authorities are renewing their interest in hospital tax exemptions. In Illinois, the Department of Revenue denied the property tax exemption of one hospital, and the status of a second hospital is under review. Similar efforts in the 1990s led some states to require hospitals to report annually on their charitable activities.

•More than 40 class-action lawsuits have been filed since June by a team of high-profile law firms against nearly 400 not-for-profit hospitals. The lawsuits take issue with the way the hospitals treat the bills of the uninsured, saying their tax-exempt status implies that they should be more lenient with the uninsured.

Billing and collections practices are behind a lot of this scrutiny: "'When you start throwing people in jail because they don't show up for a court hearing on their overdue bills, that attracts attention,' says John Colombo, professor of law at the University of Illinois at Urbana-Champaign. 'The question will be: "Why is it we're providing these huge tax subsidies to these organizations?"'"