Senator Grassley Requests Hospital Practice Information from Mosaic Life Care
Senator Grassley’s Letter to Mosaic Life Care Administration
Senator Grassley felt compelled to question Mosaic’s practices after various reports of rather aggressive billing practices had been made. ProPublic and National Public Radio reported that the hospital allegedly sued a large number of low-income individuals for delinquent medical bills rather than working with patients and offering them reasonable payment plans for medical care. These reports also detailed several instances where Mosaic failed to identify patients that would have qualified for financial assistance had they applied for it and were reportedly subjected to certain abusive billing and collection practices, rather than being provided with adequate financial assistance options.
According to these reports, Mosaic utilized Northwest Financial Services, an in-house debt collection agency that operates as a for-profit organization and aggressively pursues patients who fail to pay their hospital bills. These aggressive collection practices included both lawsuits and garnishment of wages.
In his letter to Dr. Mark Laney, Senator Grassley pointed out that Mosaic, through Northwest Financial Services, had sued more of its patients than any other hospital in the state of Missouri. Additionally, at a time when some hospitals are struggling economically, Mosaic reported a $45,000,000 profit last year.
In light of this information, and in an attempt to learn more about Mosaic, Senator Grassley ended his letter with a request for information from Mosaic regarding their past implementation of its financial assistance programs. The requested information included, but was not limited to, the following:
- Briefing on billing and collection policies and practices;
- Financial breakdown of money collected from patients through Northwest Financial Services, as well as an analysis of whether these individuals were actually eligible for financial assistance;
- Summary, breakdown and methodology of calculating charity care over the past five years; and
- Descriptions of any efforts made to determine eligibility for free or discounted care.
Response to Senator Grassley’s Letter
In response to Senator Grassley’s inquiries, Dr. Mark Laney first thanked him for his leadership role in the hospital and non-profit community. Dr. Laney then continued to name some of Mosaic‘s recent accomplishments and explained that his hospital has fully embraced the new community health needs assessment requirements outlined in Internal Revenue Code §501(r)(3).
Dr. Laney cited certain examples of how Mosaic helps the community, including investments in educational and wellness programs to improve the health status of local residents, partnership with Second Harvest Community Food Bank which contributes fresh produce to underprivileged children, the provision of operations and medical resources to Northwest Health Services and financial support to the Social Welfare Board. In his letter, Dr. Laney also explained that nearly 8% of the organization’s net patient service revenue is dedicated to community benefit, which is higher than the national average for a hospital of that size.
Lastly, Dr. Laney defended some of the accusations made against the hospital. He explained to Senator Grassley how the hospital informs patients about its financial assistance policy as well as the process for collections after accounts are considered delinquent. Dr. Laney concluded by stating that the hospital believes it is adhering to all eligibility guidelines and, due to recent public scrutiny, the hospital has compiled a task force to analyze and improve billing and collection policies and practices prospectively.
Community Benefit Standard
In 1969, the Internal Revenue Service (“IRS”) issued revenue ruling 69-545, which “remove[d]” from Revenue ruling 56-185 “the requirements relating to caring for patients without charge or at rates below cost.” under the standard developed in Revenue Ruling 69-545, which is known as the “Community Benefit Standard,” hospitals are judged on whether they promote the health of a broad class of individuals in the community.
The ruling involved a hospital that only admitted individuals who could pay for the services (by themselves, private insurance, or public programs such as Medicare), but operated a full-time emergency room that was open to everyone. The IRS ruled that the hospital qualified as a charitable organization because it promoted the health of people in its community. The IRS reasoned that because the promotion of health was a charitable purpose according to the general law of charity, it fell within the “generally accepted legal sense” of the term “charitable,” as required by IRS Treas. Reg. §1.501(c)(3)-1(d)(2).
The IRS concluded that the hospital was “promoting the health of a class of persons that is broad enough to benefit the community” because its emergency room was open to all and it provided care to everyone who could pay, whether directly or through third-party reimbursement. Other characteristics of the hospital that the IRS highlighted included the following: its surplus funds were used to improve patient care, expand hospital facilities, and advance medical training, education, and research; it was controlled by a board of trustees that consisted of independent civic leaders; and hospital medical staff privileges were available to all qualified physicians.
Conclusion
All hospital facilities need to be aware that Revenue Ruling 69-545 continues to be the “community benefit standard” with which hospital facilities must comply in order to maintain tax-exempt status. Under federal law, tax-exempt hospitals are required to provide community benefit which includes, but is not limited to, charity care for low-income patients. Furthermore, under Internal Revenue Code §501(r), hospital facilities must also comply with many additional rules and regulations regarding a hospital facility’s community health needs assessment, financial assistance policy, billing and collection practices and limitation on charges. Hospital facilities should ensure that they are in full compliance with the final IRC §501(r) regulations by their effective date.
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