Publications: Status Update: Hospital Fair Billing Act and The Tax-Exempt Hospital Responsibility Act

To read the original Client Update in PDF format, please click the Related Files link.

Status Update: Hospital Fair Billing Act

House Bill 4999 passed the Senate unanimously on Monday, March 27, 2006, (50-0-0). The bill will now be sent to the Governor for his signature.

Status Update: The Tax-Exempt Hospital Responsibility Act

We know that many of you have received the IHA’s notice concerning Illinois Attorney General Lisa Madigan’s agreement not to pursue House Bill 5000 during the current legislative session, opting instead to negotiate the proposed legislation with hospitals over the course of the year before reintroducing the bill next year. We are pleased that our February 21st conference played a part in enhancing the dialogue and debate concerning the issues raised by House Bill 5000.

We are especially pleased that the 2/21 event helped move the focus of the debate to include due consideration of the capital markets implications of the bill. We continue to believe that the final form of the legislation must be deemed workable from the perspective of the rating agencies, bond insurers, banks and institutional investors that review the credit worthiness of Illinois not-for-profit hospitals and compare those hospitals to their counterparts in other states.

We are also concerned that, when negotiations ensue, attention be paid to important elements of the legislation that received less attention than the minimum 8% charity care requirement. For example, in its current form the bill would impose an obligation on hospitals to provide unlimited charity care to all who qualify, with perhaps greater financial implications in some cases than the set minimum threshold. Also, hospitals would be required to deliver all “medically necessary services” -- a term which is broadly defined and does not appear to consider capacity or service line limitations, or how the physician component of such services will be covered.

Action Item: What to do in the interim

Given the Attorney General’s commitment to making forward progress on this bill next year, it is essential that tax-exempt hospitals continue their careful review of House Bill 5000 generally and with an eye toward these credit-related issues in particular, and that they work closely with the IHA as it negotiates a revised version of the proposed legislation with the Attorney General.

At the same time the Illinois Attorney General is proposing changes at the state level, a number of other related initiatives continue. Senate Finance Committee Chairperson Charles Grassley (D-Iowa) continues to push for federal legislation in this area; the IRS is initiating an audit of a significant number of hospitals regarding their satisfaction of community benefit standards, executive compensation and related activity; and local assessors in Illinois continue their methodical steps toward the possible taxation of previously exempt hospital properties.

It is critical that tax-exempt organizations and their officers and directors understand the current rules and regulations applicable to their tax-exempt status and reaffirm that their business practices are in line with regulatory expectations. Moreover, they should be prepared to respond to audits and inquiries in a manner that demonstrates both sensitivity to tax-exempt standards and compliant business practices. We continue to work closely with Illinois hospitals in the areas of internal audits, board education, review and drafting of policies and procedures, regulatory investigations, and related needs.