Charity Care. The local newspaper of a large urban area printed a story titled “Charity Care by Hospitals Stirs Debate.” The story quotes one legislator who wants “to ensure that the state’s nonprofit hospitals are fulfilling their obligation; that is to provide charity care at least equal to the tax exemption they receive as a nonprofit entity.” The following table is provided:
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Comparison of Selected Factors in Three Nonprofit Hospitals (dollars in millions) |
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Hope Hospital |
St. Pat’s Hospital |
Capitol Hospital |
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Estimated taxes the hospitals would |
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pay if they were not tax exempt |
$6.8 |
$2.2 |
$4.5 |
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Charity and other uncompensated care |
$17.8, of which $3.8 is bad debts |
$3.1, not including bad debts |
$6.7 |
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Community service programs* |
$1.6 |
$1.0 |
n.a. |
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Unpaid cost of Medicaid |
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and Medicare |
$3.4 |
$0.6 |
n.a. |
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Nonreimbursed research and |
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graduate medical education |
$2.0 |
$0.7 |
n.a. |
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Required
a. What are the obligations of IRC Sec. 501(c)(3) organizations to provide charity care?
b. Do you agree that the hospitals are not fulfilling their obligations? Why or why not?
c. What additional information would you like to have? Do you expect to find this information in the audited annual financial statements?