AHA and HFMA Urge Treasury To Withdraw Form 990, Schedule H, Part V

AHA and HFMA Urge Treasury To Withdraw Form 990, Schedule H, Part V

In a May 16th, 2012 letter to Emily McMahon, Acting Assistant Secretary, U.S. Department of the Treasury and Joseph H. Grant, Acting Commissioner, IRS Tax-Exempt and Government Entities Division, the American Hospital Association (“AHA”) and Healthcare Financial Management Association (“HFMA”) have urged Treasury to withdraw Part V of Form 990, Schedule H or, at a minimum, issue a notice making the completion of Part V of Form 990, Schedule H optional while the Office of Management and Budget (“OMB”) reviews and approves the Schedule H, Part V in light of public comments, as required by law.

PATIENT PROTECTION AND AFFORDABLE CARE ACT

Internal Revenue Code (“IRC”) §501(r) was enacted as part of the Patient Protection and Affordable Care Act (“PPACA”) and introduced four requirements that are applicable specifically to tax-exempt hospitals with varying effective dates for compliance. While continuing to meet the general requirements applicable to all IRC §501(c)(3) organizations, tax-exempt hospitals must also meet these four new requirements. All hospitals are required to satisfy these new requirements for all of its facilities that are, or are required to be, licensed, registered or similarly recognized by a state as a hospital.

FORM 990, SCHEDULE H, PART V

Part V of Form 990, Schedule H, now includes the three separate sections as follows:

• Section A, Hospital Facilities.
• Section B, Facility Policies and Practices (for each facility listed in Part V, Section A).
• Section C, Non-hospital facilities.

Sections A and C require a listing of the hospital and non-hospital facilities; respectively. These sections were required to be completed on all hospital’s 2010 Forms 990.

Section B includes twenty-one (21) questions that relate to the four new hospital PPACA requirements introduced by IRC §501(r). The questions in Part V, Section B are organized as follows:

1. Community Health Needs Assessment, questions 1-7.
2. Financial Assistance Policy, questions 8-13.
3. Billing and Collections, questions 14-17.
4. Emergency medical care, question 18.
5. Charges for medical care policy, questions 19-21.

AHA AND HFMA LETTER OF COMMENT

There are several reasons why AHA and HFMA feel that Schedule H, Part V should be removed. In the May 16, 2012 letter, AHA and HFMA state that “We are, however, troubled by the inconsistent messages in the Notice regarding the IRS’ intent to comply with the PRA. While the Department presents the invitation for public comment as required by the PRA, the actions of the IRS remain at odds with PRA compliance.” Specifically, AHA and HFMA state that the IRS granted the community only five days to respond to the comment solicitation as opposed to the 60 days as required by the PRA. In addition, AHA and HFMA state that the IRS insists that collection of information revisions included in Schedule H, Part V that have not yet been approved by the OMB but are still mandatory to complete on tax year 2011 Forms 990.

AHA and HFMA also cite the following reasons for their position:

1. Part V Schedule H Is Not Compliant With the PRA

The PRA was created to minimize paperwork and burden with respect to the IRS’ collection of information. AHA and HFMA state that, since the PRA requires that the public be provided two rounds of notice and opportunity to comment, “Hospitals have not been afforded the protections intended by the PRA.” As a result of the lack of opportunity for comment, AHA and HFMA believe that Schedule H, Part V contains “redundancies, inconsistencies, onerous reporting requirements and undefined terms.”

In addition, significant changes to Part V of Schedule H, under the PRA, require approval by OMB. Since Part V has not yet been approved by OMB, it should not be required to be completed. In a February 2, 2012 letter to Jeffrey Zients, Acting Director of OMB; AHA, HFMA and VHA, Inc. provided detail of the PRA requirements and the fact that the revised Part V of Schedule H is required to be submitted, along with public comment, to OMB for approval.

2. Part V Schedule H Does Not Meet the PRA-Test for Approval

AHA and HFMA state that Schedule H, Part V is not the least burdensome way to implement IRC §501(r). AHA, HFMA and VHA, Inc., in an August 24, 2011 letter to Sarah Hall Ingram, Commissioner of the IRS Tax-Exempt & Government Entities Division, provided specific line by line recommendations as to how Part V of Schedule H could be revised for improvement. This letter included comments from approximately 300 hospitals from across the country and, therefore, contains much diversity due to differences amongst the hospitals including demographics, academic v. teaching hospitals, stand alone hospitals v. multi-hospital systems and the like. The overall recommendation by AHA and HFMA with respect to this issue is to revise Part V of Schedule H to account for this diversity amongst different types of hospitals.

Other reasons that AHA and HFMA feel that Schedule H, Part V, in its current state, should be removed are the following:

• There is a large, unnecessary burden with respect to the amount of paperwork for multi-hospital systems. Multi-hospital systems that follow the same policies and procedures with respect to the IRC §501(r) requirements are currently required to complete a separate Schedule Part V, Section B for all of its hospitals, regardless of the fact that each Section B will be identical. AHA and HFMA have recommended that each system be able to complete one Section B for all of its hospitals that follow the same policies and procedures.
• Each hospital in a community is required to complete a community health needs assessment by December 31, 2013. Even if working together to have a community health needs assessment, each hospital is currently required to develop its own needs assessment based on the results. AHA and HFMA feel that separate needs assessments prepared by hospitals “undermines the benefit to the community of hospitals working together and creates unnecessary paperwork”.
• Hospitals, as a result of repetitive questions and excessive paperwork, will spend unnecessary time in completing Part V as well as incur unnecessary additional expenses in doing so which will result in fewer funds available to be used in furthering the organization’s charitable activities, purposes and services.

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A copy of the AHA and HFMA May 16, 2012 letter, with attachments, can be accessed at the healthcare services section of our Firm’s website.

For more information on the topics discussed or services we can provide, please contact:
Scott Mariani, JD, Partner
Practice Leader
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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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