How we did our re­search

Modern Healthcare - - THE WEEK IN HEALTHCARE -

Modern Health­care an­a­lyzed the fi­nances, char­ity care and other com­mu­nity ben­e­fits for 1,807 not-for-prof­its that oper­ate hos­pi­tals with data pro­vided by Guidestar, a not-for-profit that col­lects, an­a­lyzes and pub­lishes in­for­ma­tion on the char­i­ta­ble sec­tor.

Guidestar, based in Wil­liams­burg, Va., re­ceives data re­ported on the In­ter­nal Rev­enue Ser­vice Form 990, the yearly tax re­turn for not-for-prof­its, from the fed­eral tax agency. Jose Fer­nan­dez, di­rec­tor of the Guidestar Ex­change, said data re­ceived from the IRS is checked for ac­cu­racy once by com­puter and twice by hu­mans. Modern Health­care also checked ano­ma­lous numbers against the ac­tual tax forms.

Start­ing in tax year 2009, the IRS re­quired hos­pi­tals to com­plete a sep­a­rate ques­tion­naire in­cluded in the Form 990, known as Sched­ule H. (The prior year, nearly all reporting on Sched­ule H was vol­un­tary.) Sched­ule H asks for in­for­ma­tion on char­ity care, com­mu­nity ben­e­fits and other op­er­at­ing ex­penses.

The Form 990 Sched­ule H must be com­pleted by any or­ga­ni­za­tion that op­er­ates a hos­pi­tal, but not nec­es­sar­ily for each hos­pi­tal. The dis­clo­sure must be com­pleted for each not-for-profit with an em­ployer iden­ti­fi­ca­tion num­ber; more than one hos­pi­tal can share a sin­gle em­ployer ID num­ber. That means that some Sched­ule H forms will in­clude data for more than one hos­pi­tal. It also means that Modern Health­care’s anal­y­sis in­cludes at least 1,802 hos­pi­tals, but po­ten­tially more.

Nei­ther Guidestar nor the IRS was able to pro­vide the to­tal num­ber of U.S. not-for­prof­its ex­pected to file a Sched­ule H. It is un­clear how many are miss­ing from Modern Health­care’s anal­y­sis.

An­other dis­crep­ancy in the data un­der­scores the con­fu­sion that comes with any new en­deavor. IRS Sched­ule H in­struc­tions ask hos­pi­tals to sub­tract un­paid med­i­cal bills, known as bad debt, from equa­tions as hos­pi­tals cal­cu­late com­mu­nity ben­e­fits, ex­plained Keith Hearle, founder and pres­i­dent of Verite Health­care Con­sult­ing. It ap­pears that some hos­pi­tals did not. We chose to re­port the fig­ures con­tained in the form, which are the pub­lic record of hos­pi­tal com­mu­nity ben­e­fits.

Fi­nally, some hos­pi­tals we con­tacted had sim­ply made er­rors. For ex­am­ple, Lake­side Me­mo­rial Hos­pi­tal in Brock­port, N.Y., re­ported $133,351 of char­ity care in tax year 2009, which amounts to less than 1% of its to­tal ex­penses.

Brid­gett Reed, the hos­pi­tal’s chief fi­nan­cial of­fi­cer and chief in­for­ma­tion of­fi­cer, said an out­side con­sult­ing firm mis­stated the fig­ure on the tax fil­ing, and the hos­pi­tal’s ac­tual char­ity care for the year was $2.9 mil­lion, or 7.3% of to­tal ex­penses. Reed said the hos­pi­tal was es­tab­lish­ing in­ter­nal checks to con­firm the ac­cu­racy of fu­ture dis­clo­sures.

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