02/02/2009

You Don't Need to be a Weatherman...

Patricia Zieg

“You Don’t Need to be a Weatherman… to know which way the wind blows. Get sick, get well. Hang around.…” Bob Dylan’s lament in “Subterranean Homesick Blues” is certainly apropos to the tax-exempt healthcare sector given recent events.

On November 7, 2008, Modern Healthcare magazine reported that in 2007 non-governmental tax-exempt hospitals experienced a record profit of $43 billion, creating the largest single year jump in profit margin in at least 15 years. The overall profit margin was 6.9%.

Just the day before this news, Senator Max Baucus, Chairman of the Senate Finance Committee, declared in a news release, “I made sure the Finance Committee spent this year learning and preparing for action on a comprehensive overhaul of the healthcare system, and I intend for us to move swiftly and decisively with legislation in early 2009.” Baucus’ stated goals include universal coverage and using a mix of private and public solutions to insure quality affordable healthcare for all. Chairman Baucus cited several key principles as essential to successful reform:

• Universal coverage,
  
  
• Sharing the burden,
  
  
• Controlling costs, including by use of the tax code,
  
  
• Prevention, and
  
  
• Shared responsibility.
  
  

Earlier, on September 12, 2008, in Washington, D.C., a staff member of the Senate Finance Committee told attendees at an American Health Lawyers Association program that the Senate Finance Committee, including ranking member Charles E. Grassley (R-IA) and Chairman Max Baucus (D-MT), “…don’t see much of a difference between non-profit hospitals and for-profit hospitals.” At the same gathering, the staffer urged non-profit hospitals to increase efforts to convey information concerning community benefits and charitable care to Congress and to the public.

Based on these events, it seems nearly inevitable that there will be renewed interest in tinkering with federal tax exemptions for healthcare entities. The non-profit healthcare community should be ready for both the direction and velocity of regulatory winds, and carefully assess how it can demonstrate to America the value of continuing their tax exemptions.

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For more information on this article, or to learn more about our Health Care Practice Group, contact Patricia Zieg, 402.930.1714.