Episode 3: What’s at Stake for Nonprofit Hospitals

Episode Transcript
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(00:01):
On today's episode of Achieving Health,
I've got the latest policy and legislativeupdates from Washington, D.C.
for the week of June 29th, 2025.
Then I'll be joined by my Forvis Mazars
colleagues, Amy Bibby and Mary KatherineGleason, to explore what's at stake
for not-for-profit hospitals under growingscrutiny of their tax-exempt status.

(00:22):
Stay tuned.
This is AchievingHealth, a podcast from Forvis Mazars,
where we delve into the topicsthat matter most to healthcare
organizationsacross the continuum of care.
Our goal is to help younavigate the dynamic healthcare landscape
and achieve health at your organization.
Here's your host, Chad Mulvany.

(00:45):
Welcome to Achieving Health.
I'm Chad Mulvany, director inthe Healthcare Practice at Forvis Mazars.
Thank you for joining me.
Let's begin with today's WashingtonWatch segment, where I share updates
on the most recent actions and discussiontopics among federal policymakers
and their anticipated impacton healthcare providers and payers.
Today's WashingtonWatch reflects information as of 8:00

(01:08):
Eastern Time on Monday, June 30th, 2025.
My comments on these calls are based onwhat's being reported by the D.C.
trade press at the time of conversation,mixed with a lot of judgment about where
things may go, based on experience in D.C.
So today's comments reflect informationof this moment and will change.
As far as our conversation is concerned,

(01:30):
we're going to provide an updateof the One Big Beautiful Bill Act.
Over the weekend, the Senate releasedrevised text of the OBBBA
and voted to begin debate on the bill.
Moving to the Supreme Court, on Fridaythe court's decision in a case
challenging a lower court's abilityto implement nationwide injunctions
in response to lawsuitschallenging the administration's policies,

(01:52):
could result in a fragmented policyenvironment for healthcare providers.
We also, on June 20th, had CMS finalizethe 2026 exchange rule.
Many of the rules
most significant provisions are alignedwith the House passed version of OBBBA.
From HRSA,
we also had it implement 340Bcuts for FQHCs for certain drugs,

(02:14):
and this is in line with the president'sApril drug pricing executive order.
In the announcement, CMS changedthe terms of HRSA grants for FQHCs,
requiring the pass
through the savings for certain 340B drugsto qualifying patients.
And finally, we are seeingsome health plans incorporate increases
in premiums as a result of the anticipatedimpact of tariffs on healthcare costs.

(02:38):
And we'll talk more about that.
But first we want to turn to OBBBA.
The Senate, after a long weekend,is scheduled to begin
voting on amendments at 9:00Eastern on Monday morning, June 30th.
Obviously, with our limited time,we can't unpack everything that's happened
over the last two weeks.
And certainlythere's a better than average chance

(03:00):
that a lot of what we talk about thismorning will have changed
by the time this dropsto your favorite podcast platform.
Late Saturday night,the Senate voted 51 to 49
to bring the revised version of OBBBAto the floor to begin debate.
What I cover isn't intended to bea comprehensive summary of the provisions,
but really more of a quick overviewof key items

(03:21):
and how we got hereand also the state of play at this moment.
In terms of the impact, preliminaryunreleased CBO estimates project that the
revised Senate draft will cut Medicaidspending by $930 billion over a decade.
This is up from over 800 billionin the House-passed version.
The bill would result in 11.8million more uninsured people

(03:43):
by 2034 in the new analysisreleased over the weekend.
Please note that it is possiblethat during debate, additional amendments
will be made to provisionsimpacting healthcare
organizations, which will changethe final impact of the bill.
In terms of how we got here on Saturdaynight, the vote to begin the process
of moving the bill forward in the Senatewas held open for three hours

(04:06):
to allow Senate leadership,Vice President Vance
and President Trump to negotiatewith those who were still on the fence.
Senators Paul of Kentucky,as expected, and Tillis of North
Carolina,were the two ultimate Republican nos.
SenatorJohnson of Wisconsin was initially a no.
But flipped his voteafter securing agreement
from leadership to back an amendmentfrom Senator Scott of Florida

(04:27):
that would save approximately $200billion over ten years
by bringing the FMap for the expansionpopulation in line with each state's
natural match rate,starting in 2030 for new enrollees.
If this amendment is passed,it is estimated that it will result
in additional 12 million individualslosing healthcare coverage.
At this time, it is unclearif the amendment has sufficient support

(04:50):
to make it into the final package.
If it does, I think it's unlikelythat the House would pass a bill
that includes language eliminatingthe enhanced ACA match rate, though
if the time delay is long
enough, members of the House may view itas a problem that can be dealt with later.
In terms of process,the Senate final vote is likely
to occursometime later today, Monday, June 30th.

(05:12):
Dems required the 940-page bill to be readaloud on the Senate floor,
which took approximately 16 hours overSaturday night and into Sunday morning.
After reading, the Senate allows for 20hours of debate amongst the parties.
Split evenly,
the Demsuse their full ten hours of debate
to slow the process down, in hopesthat constituents
might convince enough senatorsto oppose the bill to sink it.

(05:33):
Debate wrapped up around twoin the morning on Monday,
and then there was a brief break,which we then will get lead into the quote
unquote, vote-a-rama,which allows for senators to introduce
an unlimited number of amendmentsand can drag on.
This will begin,
as I've mentioned earlier, at ninein the morning on Monday, June 30th.
In terms of next steps,while final passage is not assured.

(05:55):
It is likely Senator
Paul will not change his vote,and it's unlikely that Tillis will either,
unless he secures major changesto the provider tax provisions.
However, any change that puts him in theyes column will likely cost votes
from fiscal conservatives.
Two others
to watch will be Collins of Maine,who voted to allow the process to proceed.
However, she did not committo voting for the final package.

(06:18):
And also, while SenatorMurkowski of Alaska initially voted yes,
when she did, there were two provisionsin the bill that specifically
benefited Alaska that have beensubsequently ruled extraneous
by the Senate parliamentarian,so she may be in play as well.
If both were to flip their vote to no,that would be enough
to sink the bill assumingPaul and Tillis are still nos.

(06:39):
And not surprisingly, there are a hostof other issues that are bubbling up.
Assuming the Senate version passes,it flips back to the House.
SpeakerJohnson has told members to be prepared
to vote for the billas early as Wednesday.
While it appears that the dealnegotiated on SALT caps has satisfied
most Republicans from California,New York, and New Jersey,
the phase down on the providertaxes will likely remain an issue.

(07:03):
Politico is reporting that as of Saturdayafternoon, more than a dozen House
Republicans have privately saidthat they will vote against the bill
unless the provider
tax provision moves closer to the oneoriginally passed in the House.
However, I will note that saying it inprivate is one thing; voting
against the president's agendais a completely different proposition.
In terms of that provider tax provision,

(07:26):
it freezes provider taxesas of the date of enactment.
For new taxes,the hold harmless threshold is set at 0%,
including existing taxesapplied to new classes
for expansion states beginning in fiscalyear 2028 and continuing through 2032.
The threshold will be reducedby a half a percentage point

(07:47):
annually until it reaches 3.5%.
So for those keeping score at homein 2028, the safe harbor would drop to
5.5%, ‘29 5%, ’30 4.5%,
‘31 4%, and finally in ’32 3.5%.
It's important to notethat the expansion state
phase down does exclude nursing homesand intermediate care facilities.

(08:10):
For non-expansionstates, the hold harmless
will remain frozen at the providertax rate as of the date of enactment.
As everyone's aware,
the Senate parliamentarian ruledthis provision extraneous last week
and therefore ineligibleto be included in reconciliation.
However, Majority Leader Thune and SenateFinance Chair
Crapo were able to fix itby delaying the start by one year,

(08:33):
which also had the benefit of helpingto secure support from moderates.
The revisions have subsequently
been blessed by the parliamentarian,so there is no procedural issue here.
Senator Hawley, who had initiallyexpressed concerns about the provider
tax provision in the Senate FinanceCommittee draft, now supports the bill,
although he has said that he will worksubsequently to delay the cuts.

(08:56):
The CBO estimateon the Senate version of the provider tax
finds that it will save $191 billionover 10 years, which is more than double
the $89 billion saved by Housemoratorium on provider taxes.
The Senate versionalso includes a requirement
regarding the waiver of uniform taxrequirement for the Medicaid provider tax,

(09:18):
and this certainly reflectsthe language and modifies the HHS criteria
that must be considered when determiningwhether certain healthcare
relatedtaxes are generally redistributive.
This provision is largely unchangedfrom the House-passed version,
and similar to the CMS ruleproposed on May 12th.
In terms of state-directed payments,the Senate bill caps state directed

(09:41):
payments at 100% of Medicare in expansion
states and 110% in non-expansion states.
It also temporarily grandfathersSDPs approved
or where there was a “good faith” effort
to be approved by May 1st, 2025.
Revision in the Senate languageincludes removing a language

(10:03):
allowing preprints to be submittedto the Secretary prior to enactment.
For payments for rural hospitals,if a state has approved
or a good-faith effortbefore enactment of the legislation,
the state directed payment may temporarilyexceed the Medicare payment limits.
Rural hospitalsinclude those located in a rural area,
treated as being in a rural areaor located in a rural census tract,

(10:26):
as well as critical access hospitals,sole community hospitals, Medicare
dependent hospitals, low-volumehospitals and rural emergency hospitals.
Payments for non-ruralhospitals are subject
to the May 1st deadline for approvalor the good-faith effort.
The total SDP amount for hospitals
in all states would be reducedby 10 percentage points annually,

(10:48):
until the specified Medicare paymentrate limit is achieved.
Beginning with the rating periodon January 1st, 2028.
For context, the House versiongrandfathered payments approved prior
to enactment of OBBBAregardless of expansion status.
It capped payments for new state-directedpayments and expansion states
at 100% of Medicare and 110% of Medicarefor non-expansion states.

(11:11):
And then under the House version,if a non-expansion state
subsequently expanded,their new SDP would be capped at 100%.
While advocatesfor limiting state-directed payments
point to their rapid growthas proof of a problem,
there certainly is a bit of a flawwith this take.
Over the last 15 years, as more stateshave shifted their Medicaid populations

(11:33):
from fee-for-service, the supplementalpayments for that population,
so fee-for-service UPL, have declinedin aggregate due to a smaller base.
Much of the increased SDPspending is to replace UPL payments
and other pass-throughtransitional payments that otherwise
would have occurred had therenot been a shift to Medicaid managed care.

(11:54):
While it is true that there has beensome increase in spending due
to SDPs, it results from wheresome states now
use provider taxes to fund SDP ratesabove Medicare, thus increasing
the federal share compared to UPLwhen it was capped at Medicare.
The Senate bill also includes,like the House bill, work requirements,
and these would require individualMedicaid beneficiaries aged 19 to 64

(12:17):
who are not pregnant or disabledto meet certain work requirements.
So beginning December 31st, 2026,the initial draft of the Senate Finance
Committee OBBBA languagedelayed the start until no later
than December 31st, 2028to give time to implement.
The new version pulls the date forwardfrom the December

(12:38):
16th SFC draftto match the House language.
In order to sort of meetthe work requirements, individuals
must engage in qualifying activities—soeither work, community
service, educational programs or jobtraining for at least 80 hours a month.
The legislation would exempt,among other groups, parents, guardians
and caregiver relatives of childrenaged 14 or under or a disabled individual.

(13:03):
And it's also worth noting thatthe House-passed version exempted parents
and caregivers of children or disabledindividuals, or dependent children.
So basically those up to 18 or under.
It's importantto remember that Arkansas' experiment
with work requirementsled to a 25% disenrollment rate,
or approximately 18,000 individuals,for the applicable population.

(13:26):
Medicaid beneficiariesoften struggle to meet work requirements
due to complex and burdensome reportingsystems that are difficult to navigate,
especially for those with limited accessto the internet,
unstable employment, or those who workmultiple jobs or in the informal economy.
Many are already workingor qualify for exemptions, but still risk
losing coverage because of confusing rulesand administrative red tape.

(13:50):
Georgia's recent implementationrequired a $50
million investment in administrative staffand system upgrades.
Given that cost, the funds allocatedin the Senate bill to help states
implement this in a very short timeframe are woefully inadequate.
Like the House passed version,the Senate version includes a reduction

(14:10):
in the FMAP for states that providecoverage to undocumented adults.
And so what it would do is lowerthe FMAP from 90% to 80%.
For those states that choose to providecoverage using state-only funds,
this was originally ruledas extraneous by the parliamentarian.

(14:30):
However, it appears
they were able to cure this defectby correcting a statutory cross-reference.
Additionally, due to concernsabout the impact of both the phase
down in provider taxes and state-directedpayments, a rural Health
transformation program has been addedto the Senate version of OBBBA

(14:51):
and the language releasedSaturday morning includes a fund
that provides $25 billion,which is phased down over five years,
and so in Fed fiscal ‘28 and ’29it would provide 10 billion.
In 2030 and 2031,it would provide 2 billion.
States would need to apply to CMSto receive the funds from the program,

(15:11):
and the funds would be distributedequally,
or half the funds would be distributedequally to states.
So states like California, Texas,New York, Florida would get shortchanged
because they are larger stateswith large numbers of rural hospitals.
Smaller states like Vermont,though, would do quite well,
kind of on a per-hospital basis.
The remaining funds would be distributedto states
based on a procedureto be determined by the CMS administrator.

(15:35):
The allocation procedurewould consider a state's rural population,
proportionof healthcare facilities in rural areas,
and the situation of hospitalswho serve low-income patients.
States would be required to havean approved application to receive funds,
and then the funds could be used for threeor more of the following

related activities (15:52):
promote interventions and technologies to improve prevention
or management of chronic disease;
pay healthcare providers for specificitems or services as defined by CMS;
provide training and assistancefor the adoption of technology
enabled solutions that improve caredelivery in rural hospitals; provide
assistance software and hardwarefor significant information technology

(16:14):
advances designed to improve efficiency,enhance cybersecurity capability,
and improve patient healthoutcomes; recruit and retain clinical
workforce talent to rural areaswith commitments to serve rural areas
for a minimum of five years;
assist rural communities to rightsizetheir healthcare delivery systems
by identifying needed preventative,ambulatory, pre-hospital,

(16:36):
emergency, and acuteinpatient care, outpatient care,
and post-acute care service lines;support access to substance use disorder
treatment; supportinnovative models of care that include
value-based care arrangementsand alternative payment models;
and then also additional uses designedto promote sustainable access
to high quality rural healthcare services,as determined by the administrator.

(16:59):
The Senate version of the OBBBAalso has a moratorium
on the implementation of long-termcare staffing ratios,
and so it would prohibit the HHS Secretaryfrom implementing them
from the date of enactmentthrough September 30th, 2034.
However, it's worthnoting that over the weekend
this provision was nixedby the Senate parliamentarian,

(17:20):
so we'll see if that language can be tweaked to get it back in the final version.
On a positive
note, as you might recall,the initial Senate Finance
Committee version omitted a fixfor the physician fee schedule.
The version released over the weekendincludes a temporary Medicare
physician payment increase for 2026,which provides a 2.5% increase

(17:44):
to the physician fee schedule for servicesprovided from Jan.
1 through December 31st, 2026.
We'll note that this is slightly differentfrom the House-passed version,
which would have increasedthe physician fee schedule
conversion factorby 75% of the projected increase
in the Medicare Economic Index in 2026,
and then 10% thereafter.

One more thing to note on the bill: neither the Senate Finance (18:05):
undefined
Committee language released on June 16thor the bill released over the weekend,
it does not include a three-yeardelay of the ACA DSH
cuts, which were includedin the House-passed version.
So unless there's an amendmentor subsequent legislation in the 2026
federal funding bill, hospitals are facingan $8 billion cut in Medicaid

(18:27):
DSH that would be effectivebeginning October 1st, 2025.
Moving to the Supreme Court,
the Supreme Court on Fridayallowed the Trump administration
to take steps to implement its proposalto end automatic birthright citizenship.
The constitutionalityof the administration's birthright
citizenship policy or executive orderwasn't the issue in question.

(18:51):
What the court did was granta request by the Trump administration
to narrow the scope of injunctionsimposed by lower court judges,
so that they only apply to statesand groups of individuals that sued.
However, in writing the majorityopinion, Justice Amy Coney Barrett
indicated nationwideinjunctions are limited only to the extent

(19:11):
that the injunctionsare broader than necessary.
The ruling also instructedthe lower courts
to move quickly to determinehow broad injunctions can be.
The ruling in favor of the administrationnow creates the situation
where you could have a fragmented policyenvironment or healthcare providers.
For plaintiffs in statesthat successfully challenge

(19:32):
the president's policies, implementationof that policy will be blocked
subject to further court proceedingwhen a judge issues an injunction.
Everywhere else,the policy would move forward.
And so obviously,
you can think about kind of wherethe immediate concerns might be here.
You think back to the attempted OMBgrant freeze for review
with presidential priorities,

(19:52):
which was stopped
by a nationwide injunction that wouldcertainly have an impact on CHCs
and also the attempt to capNIH grant indirect costs at 15%.
That was also stoppedby a nationwide injunction and could have
a pretty significant impacton major teaching hospitals.
We'll have to see what happenswhen the lower courts
review their injunctions in the light ofFriday, June 27th’s Supreme Court ruling.

(20:17):
Also noted that CMS on June 20th
finalized the exchange rule for 2026.
CMS estimates that between 725,000
and 1.8 millionindividuals will lose marketplace coverage
in 2026 as a result of the policiesin the finalized rule.
Please note that what follows is
not a comprehensive summary,but just key provisions.

(20:39):
And so, among other changes,the rule eliminates the low-income monthly
special enrollment period, or SEP, and CMStemporarily ends the SEP for those
with projected household incomesat or below 150% of the FPL, effective
60 days after enactment of the rulethrough the 2026 plan year.
In terms of eligibility verificationfor a special enrollment period,

(21:03):
CMS reestablishespre-enrollment eligibility
verification for all types of SEPson the federal marketplace.
Since the 2023 Notice of Benefitand Payment Parameters, pre-enrollment
verification was limited to the lossof minimum essential coverage SEP.
In addition, all federally facilitatedmarketplaces must conduct
pre-enrollment eligibility verificationfor at least 75% of new enrollees.

(21:28):
However, worth notingthat CMS did not finalize
this specific changefor state-based marketplaces,
and these changes also will sunsetat the end of the 2026 plan year.
In terms of the tax filing requirement,
the rule temporarily reinstates a policydeeming an individual ineligible
for future premium tax creditsif they fail to file their federal

(21:50):
tax income return and reconcilepremium tax credits for one year.
The policy was changed
to two consecutive years in the 2024Notice of Benefit and Payment parameters
and this policy sunsetsafter the 2026 plan year.
In terms of income verification,this temporarily requires marketplaces
to verify incomewith other trusted sources of data

(22:12):
if IRS data is not available,including requiring additional
supporting documentationor action by enrollees
and this policy also sunsetsafter the 2026 plan year.
Another piece on income verification:
it temporarily requires all enrolleeswho attest to projected household incomes
between 100% and 400% of the FPL,but whose income verification

(22:36):
results in a household income below 100%FPL to answer
additional verification questionsand provide supporting documentation.
This policy is intended to ensureonly eligible individuals above
100% of the federal povertylevel receive premium tax credits.
The rule also shortensthe time frame to resolve inconsistencies,

(22:58):
and so it removes the 60-day extensionof the statutorily required 90-day window,
during which enrollees must resolveinconsistencies.
In terms of pass-through premiums,it allows insurers to require enrollees
to pay past due premiums before enrollingin new coverage, and for $0 premiums,
it temporarily changesthe eligibility redetermination process

(23:19):
for the 2026plan year for enrollees in $0 plans.
These enrollees are required to affirmor update their eligibility
informationor face $5 premiums upon re-enrollment.
The premiums will be eliminatedonce the enrollee confirms eligibility.
Want toshift gears now and talk about HRSA.

(23:39):
And so on Tuesday,June 26th, HRSA announced that it updated
award terms for FQHCs, requiring
HRSA-funded health centers to provideinsulin and injectable epinephrine
to low-income patients at or belowthe price paid by the center
for those drugs acquired through the 340Bdrug pricing program.

(24:01):
And this change is a direct resultof the president's April
executive order on drug pricing.
The announcement encouragesFQHCs to implement the updated award
terms immediately to ensure fullcompliance and maximize patient benefit.
Given this was part of the president'sdrug pricing
executive order, it is not a surprisethat they've moved forward with this.

(24:22):
Beyond the increased cost for FQHCs,which will degrade margins,
this requirement will likely be difficultto administer given the need to identify
which individualsshould receive the pass-through discount,
and the margin degradationwill likely impact the ability of FQs
to continue providing certain services
and result in staffing reductionsfor some providers.

(24:42):
Last thing I want to cover is tariffs,or the impact of tariffs,
on health plan premiums.
Axios is reporting that plans arenotifying states that tariffs
will drive up premiums for individualand small-group market enrollees.
The article cites two different plans,one in Oregon that's asking for a 19.8%
increase, and another plan in New York,which is requesting a 38.4% increase.

(25:08):
Both plans are attributingapproximately three percentage points
of the double-digitpremium increase to projected costs
associatedwith anticipated pharmaceutical tariffs.
However, important to notethat not all plans are incorporating
a swag for tariffs,and the article cited a couple of plans
in Oregonthat had elected not to bake this in.

(25:29):
A couple of thoughts on this.
First,given that some plans are putting a swag
into their premiums for tariffs,I think hospitals and other providers
should absolutely be askingfor an additional rate bump
to account for tariffsrelated to supplies and drugs.
In theory, that 3% bump that the two plansmentioned in the article or asking for
should be purepass-through to the provider,
since it's going to be the providerthat's absorbing the cost of the tariff.

(25:53):
Second, it's not just tariffs driving uppremiums, or at least in the exchanges.
The provisions in the OBBBA,if enacted, will certainly degrade
the risk pool in the exchanges,
which will increase the amount of adverseselection for participating plans.
And I think it's safe to say thatmany of the provisions in the finalized
exchangerule for 2026 will have the same effect.

(26:14):
This concludes today's Washington Watch.
Next, I'll be joined by Amy Bibby and MaryKatherine Gleason
to talk about what's at stakefor not-for-profit hospitals.
I'd like to welcome our

(26:35):
guests for today's episode,Amy Bibby and Mary Katherine Gleason.
Amy is a partner in the HealthcarePractice at Forvis Mazars.
She leads a team of professionalsdedicated to serving nonprofit hospitals
and other tax-exempt organizations,focusing on tax compliance and consulting.
Mary Katherine is a managerin the Healthcare Consulting practice

(26:56):
at Forvis Mazars.
She focuses onstrategic planning and market assessments,
including community healthneeds assessments for nonprofit hospitals.
Amy, Mary Katherine,thanks for joining us here today.
Thank you for having us.
I'd like to start by asking each of youto share a little bit of your work
that you do with healthcare organizations,

(27:18):
and what led you to this field,and maybe, Amy, we can start with you.
Sure. Yes.
I really beganmy career in public accounting,
working in tax,and very quickly had the opportunity
really as a beginning associate,to work with healthcare organizations.
I enjoyed working in the healthcare space

(27:39):
and decided to specialize in healthcareearly on.
And that's where I spend the vastmajority of my time today.
Well thank you.
That's great.
Mary Katherine, same question to you.
Yes. So, I fell into consulting—wasnot the plan that I had,
but I come from a long line of cliniciansand quickly realized
that that was not the path for me.

(27:59):
So, I joined,
you know, Forvis Mazarsthrough our analytics team originally.
And my goal there was learningand prioritizing dashboards, applying
the insights to it, to the strategicplanning team at the time.
Now since
integrated into that strategicplanning team where I still can
what I say, I can speak programmer,but I can also speak CEO.

(28:22):
So trying to straddle that conversationbetween the two of, you know, a service
line, enterprise, market assessment,planning, relying heavily on the data,
but moving more into some of thesemore strategic spaces.
Well that's great.
You know,
a lot of what you both said about yourexperiences resonates with me in my past.
You know, when I was thinking aboutwhat I wanted to do when I “grow up,”

(28:47):
I wanted to have an impactand improve communities,
which I think really speaksto Amy's experience.
But like you, Mary Katherine,I mean, candidly, to get in a little bit
about my personal self,I'm not good with blood.
So therefore, being a clinicianwas just off the table, which is how
I ended up in healthcare managementand health policy.
So that's just kind of funnyhow and, you know, it seems to be a common

(29:08):
threadthat connects everybody that we work with.
So in terms of getting into our discussiontoday related to tax-exempt hospitals,
and this is, you know, overthe last ten years, if you think about it,
we've seen increasingscrutiny of tax-exempt hospitals.
And while there was a little bit ofa break during COVID because of healthcare

(29:29):
heroes, it didn't take longfor that period of grace to fall apart.
And so we see the same scrutinyof anecdotes
about organizations collection practicespop to the surface.
And really, it's at a pointnow where we've seen letters from
Grassley and Warren and other senators

(29:51):
to the IRS result in 35 not-for-profit
hospitals currently having their 990sbeing scrutinized.
It was certainly changes to tax-exempt
status or tax-exemptbond financing were on the table
as part of the reconciliation package,at least initially.
And, you know,just because they're not in the bill today
doesn't mean that next term or next year,something might not pop

(30:14):
up, particularly given how those findingsfrom the 990 review comes out.
Just kind of using that as a backgroundwanted to kind of get from both of you.
Your experience on how
potential changes to tax-exemptstatus might impact
nonprofit hospitals and their rolein helping communities achieve health.

(30:35):
Yeah, I'm happy to kind of divein a little bit there,
because tax status is really a centralpart of this conversation.
And that 501C3 exemption is viaour Internal Revenue Service.
And then our statestypically extend tax exemption
and outside of income tax exemption,there's a lot of other benefits.

(30:55):
You mentioned tax-exempt bond financingand other things.
So, you know what could be at stake
is a very important kind of conversation.
And we know where the current bar is.
And I think we'll probably touch on thata little bit.
But really, the elevation of that bar,
and requiring more

(31:17):
of the tax-exempt hospital sector,you know,
I think part of the issues that I'm seeing
are really around ensuring that hospitalsare putting their best foot forward.
So much of what we're talking aboutis public documents.
It's information on thingslike a form 990,

(31:39):
information on organization’swebsite even.
And so ensuring, you know, really step
one that those things are out there.
They are, you know, correct.
And ensuringthat the organization is putting itself
in the bestlight is just really important.

(32:00):
You know, revocation or nothaving that tax-exempt status,
would be very detrimentalto the tax-exempt sector.
So, you know,
it would be quite the money maker
for the Internal Revenue Service, just from an income tax basis perspective.
So, you know, and there is a downward

(32:23):
kind of trickle effect for propertytax exemption, sales tax exemptions,
you know, all the way down to, more minorthings like postal rate preference,
preferential rates, so that the effects
would, would be quantifiable,
but it would be very significantjust in some of those major buckets.

(32:46):
Yes, I agree,and I really like your comment
on putting your best foot forward,
because I know that a lot of housesare putting efforts into achieving health
as a broader bucket in so many differentareas of their organization.
So sometimes that in lives,in the strategic planning,
sometimes that's in the, you know, moretraditional community health arm.
And I think what the IRS iskind of pushing on a little bit is that,

(33:07):
you know, prior cycles the CHNAfor a lot of organizations,
which kind of ties into that plan
for achieving health in the communitywas more of a compliance piece.
Right.
And so now as you're seeing this emphasis,
you're starting to see rolesgetting carved out to within organization
who's trying to get their arms aroundthat.
You're seeing the trends of value-basedcare,

(33:28):
getting dedicated resourcesand thoughtfulness around it.
So, Amy, I love that idea on both sides,both to the regulation side,
but then also kind of the trends
and how it's trickling downwithin organizations
and how they're startingto make some changes
of how they think about managingtheir populations rather than just
the patient experienceand the four walls of their hospital.
You know, Amy, thank you for raising upthe state and local issues as well.

(33:52):
You know, I think we have seen statesand localities go after specific
hospitals, not-for-profit statusand in unique circumstances.
And now we've seen Governor Braunin Indiana sign a sweeping piece
of legislation that, as part of the bill,would remove tax-exempt status
from a handful of not-for-profit systemsif they don't reduce their commercial

(34:13):
rates down to something more in linewith the state average by 2029.
So certainlya lot of risk in the environment.
As we think about how hospitals
and health systems managethat state risk, that federal risk,
where should they focus their attentionto help preserve tax-exempt status?
Yeah, I would say,you know, my first kind of,

(34:35):
the lowest hanging fruit, I would say islet's not miss the easy stuff.
Let's make sure that the websitehas the basic
requirements, goes beyond the basics,but at least has the basic requirements
of what our current
501R regulations require.
Things like ensuring that the policy,the financial assistance

(34:58):
policy is on the websitein multiple language.
We know so much of 501R is aroundtransparency
and ensuring that the informationis out there to patients.
So let's not miss the bar on making surethat we're making that information
available.
That on a form 990where we're being judged

(35:20):
as to whether or notwe're complying with 501R
that we're answering those questionsin a favorable way.
That we're not admitting,hey, we're not in compliance with 501R.
So really kind of understanding again,what information is out in the public,
showing that, you know, yes,

(35:40):
we provide a calculated,you know, tangible
benefit to our community through financialassistance and charity care.
That all-important computation on pageone of Schedule H.
Again, that's how we are oftencompared to other hospitals

(36:02):
as to how much we're doing to give backto deserve that tax-exempt status.
So let's not miss the easy stuff, right?
Let's not missthe things that we have under our control.
Make sure we're capturing that data,
efficiently and effectively
so that in our reporting,

(36:22):
we're not again, kindof putting ourselves at a disadvantage.
I agree.
And, you know, another piece of it,too, is being prepared
and having done the work on the front end.
So it makes all the recommendationsthat Amy's outlined
so much more feasible and efficient.
If you put the effort in on the front endto have some discipline

(36:43):
around tracking and measuring the efforts.
And obviously there's a certain amountof that that stands today.
But when you think about opportunitiesto protect the status
and to build that airtight case,one thing I reached for quite easily
is the implementation plan componentof the Community Health Needs assessment.
It is quite literallyan implementation plan that requires

(37:05):
strategy, tactics, timeline,the resources that you're dedicating
to achieving that strategyor tactic, ownership.
And what I would argue as best practiceas far as implementation goes is,
you know, measures of successand planned outcomes.
And so if you're tracking all of thatand really managing against,

(37:27):
an implementation planthat's got some rigor around it
that ideally kind of reflectsyour strategic plan,
then it makes your tax team,it makes tracking down the numbers.
It just takes the resource allocationprocess and effort down a couple notches.
If you're putting the efforton the front end.
And then the second piece, I'd add,because I wouldn't be a good consultant

(37:48):
if I didn't have a point B comment is,you know, how you're educating
and communicating the effortsyou're doing to the audience
and the audience, first and foremost,as a not-for-profit
hospital is the community.
It's the patients you serve.
It is the community that you live in.
And so making sure that that audienceunderstands what you have to offer,

(38:10):
even outside of kind of the financialpieces of services, programs,
and then use your CHNAthat you've already conducted to see
what the barriers might be as to whythey cannot access those services.
And so use it as a retrospectof an introspective opportunity
to make ways over those barriers,if it's accessing services

(38:30):
or financial assistanceor the language barrier, and address it.
And then kind of tiedwith that relationship, I'd say
engage your community from a partnershipperspective.
Hospitals are hospitals.
They're wonderful at taking clinicalcare of patients and people holistically.
But there are a surprising amountof hospitals that conduct their CHIP
in a vacuum.
They're not looking to partnersin the community that they could engage

(38:53):
to help address,maybe a larger health issue.
And part of what that does is creates
visibility for the hospital's effortsin the broader business community.
But it also builds advocatesand a referral system
within the communityfor people to come and access services.
And the more you do that, the morethe hospital really does become an anchor

(39:14):
of the communityfor so many more needs and services
than just those inpatient clinical stays,which is what we frequently think about.
You know,Amy, you mentioned financial assistance.
And certainly like if we think aboutwhat's going on in Congress today,
and granted, this may not be trueby the time people hear this podcast,

(39:34):
but a lot of the measures underconsideration as part of reconciliation
could resultin a significant number of uninsured,
possibly up to 8 million, as a resultof the Medicaid changes by 2034.
You add in the exchange changes,plus the sunsetting of the enhanced
exchange subsidiesthat gets up to 14 million by 2034.

(39:56):
Based on your experience,where do hospitals
have opportunities to improvetheir financial assistance policies?
Yeah, I think there's a few kind of keythings that hospitals need to be aware of
as they are revising financial assistancepolicies,
not just the written documents,but their procedures around it.

(40:17):
I would say firstand foremost is really understanding
financial assistanceversus bad debt, right?
And understanding
what the criteria isfor financial assistance.
To the extent, there are presumptive
charity care provisions within the policy.

(40:39):
OftentimesI see hospitals have presumptive measures,
but they don't make their wayinto the policy itself.
So understanding presumptive measures,
including those in financial assistance,
we want to make surethat what we're doing counts.
Right.
And then also,there are some aspects of our overall

(41:04):
disclosure to the IRS and to the public.
And what figures into thatreally important computation
that I think also often gets overlookedaround subsidized health services.
It's often overlooked.
These are services that are provided
despite financial loss

(41:27):
and meet a few other pieces of criteria,but really revolve around the fact that,
you know, if the service wasn't
provided to the hospital,it would be detrimental to the community.
This is an increase in market sharesand that type of thing that, you know,
we're tryingto gain a competitive advantage
and just may happen to operate at a lossthe first few years.
Right?

(41:47):
These are intended to be, you know,an identified need of the community.
And oftentimes that level of
detail is, takes some extra work.
Right.
So back to, Mary Katherine'scommentary around
really kind of understanding and,

(42:09):
those,you know, our perspectives, our numbers
and really doing a deeper dive into,
you know, the data around, the hospital services can really,
I think, ensure that we're includingthings, you know, neonatal intensive
care is a common example of subsidized,

(42:31):
healthcare services,inpatient psychiatric unit,
you know, so weI do see a number of facilities
that just really kind of don'ttake full advantage
of the rules and regulationsto ensure that they're getting credit.
Again, for all of

(42:51):
the costs that are truly
wrapped up in to providing that neededcare to the community.
You touched on the other piece about,you know, you've got
the financial assistance policy,but what have you seen organizations
do beyond presumptiveto improve communication and uptake?
Because I know that's a constant strugglethat even high performing organizations

(43:12):
struggle with.
The Community Health Needs Assessmentis a really great way to engage, right?
I see many organizationsthat partner with other agencies,
other hospitals in the areathat really provide a really robust,
community-engaged assessment

(43:33):
process and implementationstrategy process.
I'm glad you mentioned that, MaryKatherine, that's so important.
I just think that that is,and was intended,
to be a key way that hospitals engagewith their community
and taking advantage of that opportunity,
around the needs assessment is,

(43:53):
I think, just a key wayto make that happen.
I would add on, as you're kind of touchingabout that CHIP process of development,
like I said earlier,partnership is critical to this.
You know, you don't want a hospital systemdeveloping a transportation system
just as much as you don't want
your transportation systemperforming open heart surgery.
So let's let organizationsbe experts in their fields

(44:16):
and then partner with one anotherand leverage each other's strengths.
And so I would saykind of piggybacking off that example is
when you think about strategic planning,which is really what the CHIP is, it is
community health, community benefit,strategic planning, is
have that rigor upfrontbut also revisit it.

(44:36):
No implementation plan can live viablywhen it sits on the shelf
and collects dust.
What it really needs,and this is best practice
that every organizationshould be doing with implementation plans.
Pull it out quarterly,pull it out annually or even biannually.
I'd be happyif some organizations did that
and take a look at what strategiesare working, what are not working,

(44:57):
what is worth the investment,what's not worth the investment,
and allow the plan to be agile and flex
with your organization, flexwith your community's needs.
I think about,you know, Appalachia and Hurricane Helene
is that—overnight—dramatically changedwhat their community
health looked like for those communitiesand what the top needs look like.

(45:18):
And so, having the partners engagedin that conversation
just further supports that communicationgoing back and forth
when you're pulling it out annually,
taking a secondlook at it, bringing others
in the conversation and saying,is this really worth our investment?
Or is it,
you know, this other item over here now,a bigger priority than it was last year?

(45:38):
Yeah, I appreciateyou underscoring the difference there
between the needs assessmentand the implementation strategy.
Again,because the assessment is very important.
It really establishes where we are going,where we need to be
and the implementation strategy is kind ofwhat we're going to do about it.
Right.
And that is an areathat I've seen an increased,

(46:00):
interestin IRS audits of 501R compliance.
The first few rounds, the first few years,they really, frankly, were
learning themselves what an implementationstrategy was all about.
And the fact that it was even requiredwithin the regulations.
Now they've got it down, right?
And they're understandingthat the implementation

(46:23):
strategyis really where the action happens.
That's where we have action plans
and really have the opportunity
to engage with our partners,with our communities.
You know, post identification of whatthe needs are,
what we've all planned togetherto do to address those needs.

(46:45):
Great.
You know, we've talked a little bitabout like, steps
hospitals can take to uncovernew opportunities.
We've also talked a little bitabout how to incorporate information
from the community health needs assessmentinto strategic planning.
But Mary Katherine would be interestedin kind of getting your perspective
on how hospitals can create a budgetfor community

(47:06):
benefits investments that are alignedwith these strategic goals.
Yeah, that's a great question.
And I would also love Amy weighing inon it from a very practical perspective.
But what comes to mind,and I know I keep harping on this, is
have the rigor aroundyour implementation plan
and engage your strategy teamin, early in the process.

(47:26):
So like Amy said,
you know, so much of the CommunityHealth Needs Assessment is the data.
It's engaging the community voices.
It's looking to see where are their needsthat are validated by that qualitative,
you know, ‘this hurts’feeling from the community,
but it's also present in the data.
Your chief strategy officers,your VPs of strategy.

(47:47):
This is what they're doing.
They're just doing it from a differentperspective within the hospital.
So I would encourage organizationsto bring their strategy team
into the CHNA development processand implementation plan process.
A) it's going to create more continuity,which is always just a great thing
across an organization,
but B) it's going to enmesh itwith your strategic planning process.

(48:11):
We really ideally like to see thathappen before you start your,
well, we can call it annual, but,
you know, your larger strategic planningeffort, cycle.
And the reasonwhy that kind of ties into this
in a budget perspectiveis obviously there's components
that can be allocated towards communitybenefits and be included on your 990.

(48:32):
But there's also other strategies that,when there's the understanding
of having the community health piece of itmay actually overlap
with some of the strategieswithin the organization
and be a desired areaof spend and investment,
even if it's not able to be allocatedtowards community benefit.
And so that's part of the reason whywe're thinking about that budget is track

(48:54):
those staff hours, track the dollarsyou're putting into education platforms,
the fairs you're going to, track everything you can along the way
so that once you get to that tax time,
that reporting time, you have somethingthat you can look back to.
And like I said early
on, that rigor around your implementationplan, regularly revisiting it.

(49:15):
And if you have a PMO thinking aboutputting a PMO kind of over
this would really help that documentationthat sets the budget,
goes for approval at the boardand also engages the board.
Some understanding the waysthat the hospital is intentionally
attempting to invest in the community,that may not always match
bottom line goals. I think all of that

(49:37):
is spot on.
I would add, you know, their understanding
and capturingthe data is just so important.
Making that investment,I think is just so important.
I would also just kind of flip the coina bit
as a different way for hospitalsto think about this.

(49:58):
You know, we know now that there is not
a stated thresholdfor the amount of community
benefit investments we must achieve
to maintain our tax-exempt status.
We've had 5% being floated,as to an acceptable level,

(50:19):
but the IRS has really remained
silent on establishing thresholds.
And Chad, you mentioned at the beginning
of our discussionaround Senator Grassley and Warren's
latest letters that really focuson establishing some of those floors.
So I do think that that is somethingthat hospitals should prepare for.

(50:43):
If that floor is a 5% level
or an 8% level or whatever that is,
how are we going to get to
our required floor,let alone exceed our floor?
To justify our tax-exempt status?
So I do believe thatthere is a reverse way

(51:06):
to think about this,from what I commonly see in a form 990
filing process,which is, again, retrospective, okay?
But from a budgetary perspective,how much, you know, how do we get to x
percent of financial assistance through,
you know, write offs, presumptive,

(51:27):
subsidized healthcare,all of the other categories that count.
You mentioned other things, MaryKatherine, around some of the community
activities around, health fairsand those types of things.
So make sure that we are,
you know, being proactive

(51:47):
in making those investments.
You know, because again, of,we know those things
largely are already happening.
And yes, we do have an increased,
level of scrutiny that I do believeit's prudent for us to plan for,
having some required

(52:10):
thresholds, potentially, in the near-term.
Mary Katherine,I wanted to pick up on something
that you mentioned through the processand involving the board in the process.
What I like about that,or I guess the double word score is, is
in the process of sortof bringing the board
into the budgeting processand the targeting process
in helping them understandwhat the organization is doing.

(52:31):
You're also helpingenable them to be advocates for you
because they're community leaders,they're out in the community.
And so they have a good understandingof what the organization is doing.
They can tell their peers.They can tell other community
leaders about the great workthe organization does.
So I think there's a knock-on effect therethat shouldn't be underappreciated.
What else—you know, we've talkeda little bit about communicating

(52:54):
what the organization is doing—how elsehave you seen organizations
educate policymakers, legislators,community leaders and other stakeholders
about the benefits that a tax-exemptorganization is providing?
Yeah, that's a great question.
And I think that ties nicelyinto Amy's comments
about being forward-looking,as I think that this is because

(53:15):
of some of the change in landscapeand temperature in this area.
Organizationsare starting to think about it.
So I would say,
probably don't have a ton of case studieslooking back at where they've necessarily
done it well, but reallythinking to the future about it,
which is where partnerships have come upmuch more and being those advocates.
The second piece that I was thinkingabout earlier, you know, is

(53:37):
leveraging the old adageof making your boss look good.
You know, hospitals in this situation,you know, the federal government
in many ways is the bosswhen we kind of think about this.
And the board membersobviously are too, to a certain extent,
but I think the principle remains,
as we think about the work that we dois, right, like,
bring humility, bring the good work,the excellent work to the table.

(54:00):
But don't be shyabout patting yourself on the back.
And so,
a couple things that have come to mind,and this is pulling on
some of my experience as an internin a congressional office, is,
I don't think the community realizesthat there are caseworkers available
through their congressmenand women to be able to provide services.
Usually that's through obviously,government organizations,

(54:23):
but it's not uncommon for meto receive a call during that internship
of someone seeking help or a service
that was not somethingthat the congressman's office offered,
but there was someone in the communitywho dropped by a flier.
I had it on the deskand was able to share it.

And so, I think one thing is (54:39):
educate
your public, local public leaders,educate your legislative leaders
on a state and federal level of the workthat you're doing.
Invite them to tour.

But I think also two is (54:53):
give their staff the resources
and educate their staff on itbecause it really at the end of the day,
those are the people on the front linesimpacting the health of the community.
And, you know, one other piece,and I'm peeling back the layer
a little bit, is anytime someone called,I had to document the feedback.
So if someone called and said, you know,thank you so much for connecting me

(55:14):
with this hospitalthat was able to meet my needs.
They were able to, you know,provide services I couldn't afford.
Then that obviously got elevated and madethe boss look good in that situation.
So I would say look for opportunitiesto do that, build ongoing relationships,
in the community so that your advocatesare not just yourself.

(55:34):
Yeah, all of that is spot on.
I would just add also leverageyour state association relationships,
whether it's the statehospital association,
AHA, HFMA.
Use those networksto talk to your counterparts.
Some of them may in other discussionsbe considered competitors.

(55:55):
But in this respect, we're allin this together, so understanding
their struggles and, ensuring that it is,
you know, that we are all, taking advantage of, of our combined,
expertisein, in how we serve our communities.
And we all have quite the network,even within our state of other,

(56:19):
facilities that are likelyin very similar situations.
So, encouragingand driving those conversations
at our association level,I think that's also
another wayto increase that communication.
They often have direct communicationswith legislators.

(56:39):
So ensuring that those communication linesare very open
and well-supported by your organizationand by other organizations in your area.
Amy, your comment made me thinkabout the health departments,
which we've not touched on very much, butthat's another, you know, core component
that if you are struggling to figure outthe health needs of your community,

(57:00):
the health department will be happyto help you figure it out.
But on the flip side, they can alsobe a great place for resources
and connections, referrals as it relatesto some of these particular services.
But, they can also help you identify areas
where the community desperately needsnew services that you as a hospital

(57:21):
system may be better positioned than themto offer the service.
And there may also be communitybenefit, advantage,
and further demonstration of commitmentto the community.
Fantastic insights.
You know, aswe're wrapping up the conversation, if
you both had to give health systemexecutives one piece of advice

(57:42):
related to not-for-profit statusor preserving their not-for-profit
status, what would it be?
I would say, again, coming
from the tax person on the call,take a look at your 990,
know what's on thereand ask lots of great questions.
I would take this strategyand lean into that implementation
plan themeI've been saying all along is document,

(58:04):
have clarity, allocate your resourcesand be your own advocate
in the conversation around the valuethat you bring to your community.
Amy, Mary Katherine,thanks again for joining me today
and sharing your insights.
And thank you to all of our listenersfor tuning in.
If you'd like more insights relatedto nonprofit hospitals and tax-exempt

(58:25):
organizations, we have links tosome related FORsights in the show notes.
I hope you'll join me in two weeksfor the next episode of Achieving Health,
and hope you stay well until then.
You can follow
Achieving Healthon your favorite podcast platform or visit
forvismazars.us/AchievingHealthPodcastto learn more.

(58:45):
New episodes are released the firstand third Wednesday of each month.
Achieving Health is producedby Forvis Mazars LLP, an independent
member of Forvis Mazars Global, aleading global professional services
network, ranked among the largest publicaccounting firms in the United States.
The firm's 7,000 dedicated team membersprovide an Unmatched Client Experience

(59:08):
through the delivery of assurance, taxand consulting services for clients
in all 50 states and internationallythrough the Global Network.
The information set forth in this podcastcontains the analysis and conclusions
of the panelistsbased upon his her or their research
and analysis of industryinformation and legal authorities.
Such analysis and conclusionsshould not be deemed opinions

(59:32):
or conclusions by Forvis Mazarsor the panelists
as to any individual situationas situations are fact specific.
The listener should performtheir own analysis
and form their own conclusionsregarding any specific situation.
Further, the panelists conclusionsmay be revised without notice,
with or without changes in industryinformation and legal authorities.

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