Irs_Regulations_Between_for_Profit_and_Not_for_Profit_Hospitals

IRS Regulations i IRS Regulations between for Profit and not for Profit Hospitals TUI UNIVERSITY Natasha A. Looper Module 2- Case Assignment MHM535 – Hospital Administration Dr. Jo March 8, 2011 IRS Regulations 1 IRS Regulations between for Profit and not for Profit Hospitals Discuss some of the IRS regulations that govern profit status for organizations, including hospitals' IRS regulations that govern profit status for organizations, including hospitals are explained in the IRS publication 577 (rev. Oct 2010) which is named Tax-Exempt Status for Organizations and under Internal Revenue Service Code Section 501 (c) (3). The IRS considers an organization able to be considered for tax exemption if it is either “a trust, a corporation or an association” (The Internal Revenue Service (2010). State laws and certain language of the IRS must be considered when an organization is a trust, a corporation or an association. In additional, funds can not be given to individuals and organizations can not be active lobbyist. Organizations must be restricted to “religious, charitable, scientific, educations and literacy purposes. Qualified organizations for example are old-age homes, charitable hospitals, schools and churches” (IRS publication 577 (rev. Oct 2010). Based on the IRS regulations, explain the differences between for profit and not for profit hospitals' Based on the IRS regulations, the differences between for profit and not for profit hospitals are the following. The first difference is how each hospital can use their excess revenue or profit, which includes interest with bonds. For example, “ since bonds are obtained at a lower interest rate (therefore yielding a lower rate) and are tax exempt to the bond owner, the government does not want nonprofit hospitals earning interest in excess of the rate being paid” (Isaac D Montoya, & Donna M Meyer. (1998). IRS Regulations 2 For profit hospitals they can use their profits any way they want. Usually it’s to pay their shareholders. Not for profit hospitals must use their excess revenue or profit to reinvest back into the hospital. A second difference is that Not for Profit hospitals must provide charitable care to the community they serve. Not for profit hospitals considered charity care as discounts for needy patients care, education programs and unpaid Medicare or Medicare bills. Charitable care for many years has not been defined in the IRS regulations until recently. “Recent guidelines released by the IRS to define tax exemption for not-for-profit hospitals narrowly defined community benefit as charity care” ( Clement, Jan P, Smith, Dean G, & Wheeler, John R C. (1994). Discuss some of the challenges that not-for-profit hospitals in the U.S. are facing' Some of the challenges that not-for-profit hospitals in the United States are facing is economic challenges which are budget shortfalls and funding issues because of Medicare and Medicaid reimbursements, the increase in providing patient care to the uninsured and the raising costs of labor, drugs and medical supplies. “The rising cost of healthcare is one of the nation's most important long term fiscal challenges. National health spending is expected to reach $2.6 trillion in FY 2010, accounting for 17.7 percent of the gross domestic product” (Jim DeBrosse Staff Writer. (2009). IRS Regulations 3 Another challenge for the not-for-profit hospitals is if they will have enough qualified staff, physicians, nurses and supporting staff. A shortage of inadequate healthcare staff already exists. This increases the burnout factor with hospital staff and endangers patients’ lives. “Patient safety outcomes are related to the quality of the nursing practice work environment and nursing leadership's role in changing the work environment to decrease nurse burnout” (Heather K Spence Laschinger, & Michael P Leiter. (2006). The third challenge is making its community service and charity care which includes the challenge of scrutiny of being a not-for-profit hospital. “Nonprofit hospitals maintain their tax-exempt status, in part because they are perceived to provide social goods”. Not-for-Profit hospitals have to constantly defend why they should be tax exempt and if enough charity service is really being provided. Charity service and community service is not regulated enough to determine how much is enough. ‘In fact, several recent state supreme court decisions on the tax status of nonprofit hospitals have paid special attention to the provision of free care to medically indigent in arriving at judgments” (Frank, Richard G., & Salkever, David S. (1991). I have discussed in the above paragraphs how the IRS regulation governs the profit status of organization, including hospitals. I explained the difference between for profit and not-for- profit hospitals based on the IRS regulations. Finally, I have discussed the challenges that not- for-profit hospitals in the United States are facing now and in the future. IRS Regulations 4 Reference Clement, Jan P, Smith, Dean G, & Wheeler, John R C. (1994). What do we want and what do we get from not-for-profit hospitals' Hospital & Health Services Administration, 39(2), 159.  Retrieved on March 1, 2011 from http://proquest.umi.com/pqdweb'index=5&did=18441&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1300670157&clientId=29440. Frank, Richard G., & Salkever, David S. (1991). The Supply of Charity Services by Nonprofit Hospitals: Motives and Market Structure. The Rand Journal of Economics, 22(3), 430.  Retrieved on March 1, 2011, from http://proquest.umi.com/pqdweb'index=2&did=193431&SrchMode=1&sid=4&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1300772358&clientId=29440. Heather K Spence Laschinger, & Michael P Leiter. (2006). The Impact of Nursing Work Environments on Patient Safety Outcomes: The Mediating Role of Burnout / Engagement. Journal of Nursing Administration, 36(5), 259-267.  Retrieved on March 1, 2011 from http://proquest.umi.com/pqdweb'index=51&did=1057877671&SrchMode=1&sid=3&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1300770301&clientId=29440. Internal Revenue Service (IRS) Publications 577 (Rev. October 2010). Tax-Exempt Status for Your Organizations. Pg 20. Retrieved on March 1, 2011 from http://www.irs.gov/pub/irs-pdf/p557.pdf. Isaac D Montoya, & Donna M Meyer. (1998). Charitable care and the nonprofit paradigm / Practitioner response. Journal of Healthcare Management, 43(5), 416-24; discussion 425-6.  Retrieved on March 1, 2011 from http://proquest.umi.com/pqdweb'index=41&did=34434491&SrchMode=1&sid=13&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1300677401&clientId=29440. Jim DeBrosse Staff Writer.  (2009). Nonprofit hospitals face federal scrutiny about executives' pay :Congress, IRS already taking a closer look at compensation.. Dayton Daily News,A.13.  Retrieved on March 1, 2011, from http://proquest.umi.com/pqdweb'index=3&did=2108239351&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1300695202&clientId=29440. The Internal Revenue Service (2010).  Application Process.  October 25, 2010. Retrieved on March 1, 2011 from http://www.irs.gov/charities/article/0,,id=96210,00.html.