A bill introduced by Rep. Greg Murphy (R-N.C) that is progressing through the House committee process focuses on transparency for nonprofit hospitals and has implications for SNFs that are worth watching, according to new analysis by Jay Gormley.

The bill, HR 9504, does not directly change reimbursement or tax policy, but does represent another step in Congress's increasing scrutiny of whether nonprofit hospitals are providing sufficient community benefit to justify their tax-exempt status, he said.

Gormley, the chief investment officer and COO, Advisory, Zimmet Healthcare Services Group, said under the proposal, all nonprofit hospitals would be required to provide substantially more information as part of their annual IRS filings, including audited financial statements, detailed reporting on charity care, financial assistance applications, and explanations of how the organization is addressing the health needs identified in its Community Health Needs Assessment.

Larger hospital systems would face even broader reporting requirements, including disclosures on quality improvement spending, administrative and non-clinical expenditures, and facility-specific reporting for each hospital within the system.

And, he said the legislation goes a step further for larger tax-exempt systems with more than $100 million in annual patient revenue.

“Those organizations would be required to publicly report the profitability of individual service lines, advertising expenditures, and detailed financial information related to participation in the federal 340B drug pricing program,” Gormley said.

The Dept. of Health and Human Services would also be directed to create a standardized national service-line taxonomy, allowing policymakers and researchers to compare financial performance across hospitals on a much more consistent basis.

Lastly, the Government Accountability Office would study what the largest nonprofit hospitals would have owed in federal income taxes had they not qualified for tax-exempt status.

Hard to Ignore

Gormley said while the legislation is framed as a transparency initiative, the broader policy question is difficult to ignore. “For several years, policymakers on both sides of the aisle have questioned whether some large nonprofit health systems have evolved into highly profitable enterprises that provide relatively modest levels of uncompensated care. Whether or not this bill ultimately advances, it reflects a growing willingness in Congress to examine the financial practices of tax-exempt hospitals with far greater scrutiny than in the past,” he said.

SNFs?

As for SNFs and a connection to the sector, Gormley said nonprofit hospital-based nursing facilities would almost certainly become part of this expanded reporting framework, with their costs, revenues, and financial performance becoming more visible as components of larger health systems.

“Stand-alone nonprofit nursing facilities could also be affected in states where they are legally classified as hospitals or operate under hospital licensure statutes. Examples include California's distinct-part hospital-based skilled nursing facilities [Type A] and New York's Article 28 nursing homes, many of which are organized as nonprofit hospital corporations despite functioning primarily as long-term care providers,” he said.

Although the legislation is clearly aimed at hospitals, the definitions used in federal tax law and state licensure statutes mean that some nursing facilities could ultimately find themselves drawn into this broader transparency initiative, Gormley added.

Find the bill at Text of H.R. 9504: Tax Exempt Hospital Transparency Act (Introduced version) - GovTrack.us.

Comments or questions on this article? Contact Patrick Connole at pconnole@parkplacelive.com