Holding Nonprofit Hospitals Accountable Act
The Holding Nonprofit Hospitals Accountable Act would tighten the requirements for tax-exempt hospitals under section 501(r) of the Internal Revenue Code. Key changes include a new “community benefit standard” that a hospital organization must meet to preserve tax-exempt status, expanded governance and patient-access expectations, and a precise way to measure the level of “expenditure” the hospital must invest in activities that benefit the community. The bill also requires hospital financial assistance policies to align with Medicare rates, and it creates oversight reviews by the Treasury Inspector General for Tax Administration (TIGTA) and the Comptroller General (GAO) to assess compliance and enforcement. These provisions take effect for taxable years beginning after December 31, 2025. In short, the bill aims to increase accountability and transparency around how nonprofit hospitals serve low-income and publicly insured populations and how they spend their tax-exempt subsidies, with potential consequences for hospitals that do not meet the new standards.
Key Points
- 1Establishes a new Community Benefit Standard (501(r)(7)) for tax-exempt hospitals, requiring:
- 2- A board of directors drawn from the local community.
- 3- Provision of care to patients paying through public programs (Medicare and Medicaid) with no cap on the number of such patients at any site.
- 4- Expenditures in the taxable year that meet or exceed a threshold, allocated across training/education/research, facility/equipment improvements (with limits), and free or discounted care under a financial assistance policy.
- 5Expenditure threshold defined as 100% of the hospital organization’s value of federal, state, and local tax exemptions for the year.
- 6Special rules for improvements to facilities and equipment:
- 7- Expenditures for improvements may not account for more than 50% of the minimum spending requirement.
- 8- Purchases of other care delivery organizations (e.g., physician practices, hospitals, ambulatory surgical centers) cannot be counted as improvements.
- 9Definitions:
- 10- “Care delivery organization” refers to entities whose primary mission is delivering health care to meet a target population’s needs.
- 11Implementation timing:
- 12- Effective for taxable years beginning after December 31, 2025.
- 13Financial Assistance Policy (FAP) compliance:
- 14- Hospital financial assistance policies must be applied with rates aligned to Medicare (“according to Medicare rates”) when determining patient charges.
- 15Oversight and reporting:
- 16- TIGTA must review hospital financial assistance policies under 501(r)(4) and report findings annually beginning within 365 days of enactment.
- 17- The Comptroller General (GAO) will review IRS enforcement of the community benefit standard under 501(r)(7) and report every three years, starting within 365 days of enactment.