Becker's Hospital Review

25 Financial Management A study published in Health Affairs esti- mates tax-exempt hospitals across the nation received a collective $24.6 bil- lion tax break in 2011, up from the congressio- nal Joint Committee on Taxation's $12.6 billion estimate in 2002. For the study, the authors identified 2,980 private nonprofit hospitals. The primary sources for the data were the 2011 cost reports from the Health- care Cost Report Information System maintained by CMS and the hospitals' 2011 Form 990s, main- tained by the Internal Revenue Service and avail- able to the public. Here are five things to know about the tax breaks for hospitals, according to the study. 1. The value of a nonprofit hospital's tax exemption varies by state. At the high end of the spectrum, the tax exemption value in 2011 was more than $1 billion in the following states: California, Florida, Illinois, Massachusetts, New York, Ohio, Pennsylvania, Texas and Wisconsin. 2. The tax exemption had the lowest value at less than $100 million in Washing- ton, D.C., and the following states: Alaska, Idaho, Kansas, Maine, Montana, Nevada, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Vermont, West Virginia and Wyoming. 3. In exchange for their tax-exempt sta- tus, nonprofit hospitals must engage in community benefit activities. The study showed that tax-exempt hospitals provided $62.4 billion in community benefits in 2011, with the greatest percentage of the funds (36 percent) going toward health professions educa- tion, research and certain subsidized health ser- vices. Thirty-two percent of the funds were used to offset Medicaid shortfalls and 24 percent were used to furnish financial assistance for indigent patients. About 8 percent went to community health improvement initiatives. 4. The percentage of the funds spent on community health improvement initia- tives may increase due to the Patient Protec- tion and Affordable Care Act, according to the study. "The Affordable Care Act requires tax- exempt hospitals to engage in communitywide planning efforts to improve community health," the authors noted. 5. The PPACA will also lead to hospitals' spending on uncompensated care to go down, which could lead to more spending on community health improvement initiatives. "We hope that as the ACA's insurance reforms continue to take hold, the resulting reductions in uncompensated care will lead hospitals to increasingly expand their mission to include community health improvement," the authors wrote. n Tax Breaks for Nonprofit Hospitals Soar to $24.6B: 5 Things to Know By Ayla Ellison Tenet Completes USPI, Aspen Healthcare Transactions By Ayla Ellison D allas-based Tenet Healthcare completed two major transactions in June, including the deal that will combine its ambulatory and imaging centers with those of United Surgical Partners Interna- tional, which is owned by Welsh, Carson, Anderson & Stowe. Through the USPI joint venture, Tenet will become the largest operator of ambulatory surgery and imaging centers in the nation. It will initially own 50.1 percent of the joint venture, and a pre-determined put-call structure provides a path to full ownership of USPI over the next five years. With the deal completed, leadership at USPI will remain largely the same. "This joint venture significantly expands our ability to benefit from the growing demand for convenient, cost-efficient outpatient care and en- hances our growth and earnings potential," said Trevor Fetter, Tenet's chairman and CEO. Tenet also completed its acquisition of U.K. hospital operator Aspen Healthcare. Tenet acquired Aspen from Welsh Carson for approximately $214 million. Aspen has nine private hospitals and clinics in its network. n CMS Pays $1.3B to Hospitals for Medicare Appeals By Ayla Ellison M aking good on its offer to help clear the backlog of Medicare ap- peals by paying hospitals 68 percent of the net payable amount for short-term inpatient stays, CMS said it has paid more than 1,900 hospitals approximately $1.3 billion as of June 1. CMS made its offer last August, and only acute care and critical access hospitals were permitted to take part in the settlement process. Claims that occurred prior to Oct. 1, 2013, and were pending appeal — includ- ing claims where an administrative law judge had ruled against a hospi- tal and the hospital was appealing to a higher level — were eligible for settlement. Hospitals interested in settling had to file paperwork requesting settle- ment by Oct. 31, 2014, and they had to agree to drop their pending ap- peals. The $1.3 billion paid to the hospitals represented 300,000 claims, according to CMS. The backlog stemmed from hospitals appealing Recovery Audit Contrac- tor decisions. Hospitals have the option of appealing a RAC decision if they disagree with it. In 2013, more than 94 percent of overpayments identified were from inpatient hospital claims, with many of the top overpayment determinations due to short-stay inpatient hospital admissions that audi- tors determined were medically unnecessary. n

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