Hospitals face loss of federal tax-exempt status

Because of governmental challenges, not-for-profit hospitals can no longer take for granted their right to be tax exempt. The Internal Revenue Service is auditing nearly 1,500 tax-exempt healthcare organizations to determine how accurately they are reporting unrelated business income. At greatest risk are those hospital systems that have become overly acquisitive or have strayed from the charitable mission that originally entitled them to tax exemption. To protect their tax-exempt status, currently exempt healthcare institutions must be careful that any activities, such as joint ventures and affiliate corporations, conform to their charitable mission. In the face of tougher legislation and Federal scrutiny, hospitals must make sure they are devoted to and performing a charitable purpose if they want to keep their tax-exempt status.