Senator Grassley Calls for Discussion Draft on Nonprofit Hospitals

In a memo (PDF) released with the staff findings, Chairman Charles Grassley (R-IA) referred to a Government Accountability Office report (PDF) and testimony of IRS commissioner Mark Everson from a House Ways and Means hearing on nonprofit hospitals in May 2005 that suggested there is often little difference between for-profit and nonprofit hospitals in amount of community benefit provided. Senator Grassley added, “Not only is there often very little difference between for-profit and non-profit hospitals when it comes to serving the community, but also the release of the answers today shows that there appears to be very little difference on executive compensation.” He specifically mentioned executive travel expenses and country club dues paid by nonprofit hospitals and said he intends to “look at legislative reforms that will make sure that boards are more focused on ensuring fair, just executive compensation at all nonprofits, including hospitals.” (emphasis added)

In his closing remarks at the hearing, Senator Grassley announced that the Finance Committee staff will be drafting a discussion paper to provide the Committee proposals based on issues considered at the hearing, and to make the draft available for public comment within a few weeks. Senator Grassley specifically told staff to include the Catholic Health Association’s community benefit standard, which has been adopted by hundreds of hospitals thus far, and suggestions offered by hearing witness Professor Nancy Kane of the Harvard School of Public Health. Without mentioning IS or the Panel on the Nonprofit Sector, Chairman Grassley indicated that he had in mind a process similar to the model used with the charity reforms, which he believes successfully led to a consensus on the committee and in the charitable sector on necessary reforms. The discussion draft would serve as the starting point for drafting possible legislation, although he also suggested that some reforms might be accomplished without statutory changes by voluntary agreements among the hospitals and through state and IRS regulation.

Proposals discussed during the hearing included: improving efforts by nonprofit hospitals to make the availability of charity care known to low-income patients; better oversight of and best practices for collection agencies; more transparent reporting of executive compensation, including perks, on the Form 990; a template for reporting community benefit on the Form 990; and legislation to guide conversions from nonprofit to for-profit hospitals.

Senator Baucus (D-MT), ranking Democrat on the committee, asked witnesses about the possibility of self-regulation for hospitals. The consensus seemed to be that enforcement is better handled by the IRS and the states than by a trade association. In response to another question from Senator Baucus, all witnesses agreed that removing the tax-exempt status from nonprofit hospitals should not be among the proposals for consideration.

The witnesses at the hearing were:
Phill Kline, Attorney General for the State of Kansas;
Sister Carol Keehan, DC, President and CEO of the Catholic Health Association (IS Member);
Kevin E. Lofton, Chair-Elect of the American Hospital Association (IS Member);
Scott A. Duke, CEO, Glendive Medical Center, Glendive, Montana;
Dr. Nancy Kane, Professor of Health Management at the Harvard School of Public Health; and
Ray Hartz, Executive Director, Legal Aid Society of Eastern Virginia, Inc., Norfolk, Virginia.

Senators’ statements and witness testimony is available on the Committee’s website:

Last Updated: September 15, 2006

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