To say that health care lawyers have not been on high alert to defend the tax exemption status of non-profit hospitals is to ignore just how important this issue is. A few years ago Morristown, NJ attempted to revoke the local tax exemption - which would primarily apply to property taxes - but resolved the issue before doing so. Last year, Pottstown, PA made good on their threat to revoke the local hospital's exemption. In recent months the issue has ramped to the federal level where Sen. Bernie Sanders has questioned the federal tax exemption for hospital systems that do not provide charity care and send collections after patients.
The target at the moment is the Internal Revenue Service which gladly extends exemption from income taxes with little documented process, according to Sen. Sanders. Now comes an op-ed from Dr. Marty Makary at Johns Hopkins who claims non-profit hospitals are not provided enough charity care and engage in practices such as a financial screen for patients seeking expensive treatment like that for cancer.
It is an issue with a long slow burn but the end game is likely some standards of compliance like prohibitions on garnishing wages and requiring financial statements before treatment. At that point, the NFPs might have to choose. Are they better off as for-profits with fewer regulations or as non-profits with lower taxes. There is some reputational risk here as well.
