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Grassley to Investigate Nonprofit Hospitals

(March 27, 2006) Senator Charles Grassley (R-Iowa), chair of the Senate Finance Committee and the lead critic of nonprofits in Congress, is now expanding his investigation of the sector into nonprofit hospitals.

In a letter to the American Hospital Association (AHA), Grassley asked for recommendations from the organization about how Congress should define “charitable care” – services and subsidies a hospital provides to care for the needy. Hospitals are required to provide charitable care in order to receive their tax-exempt status. However, the Internal Revenue Service has loosened those restrictions considerably over the past several decades.

A staff members from the Senate Finance Committee has indicated that many Senators are concerned about people who lack health insurance and are being forced into bankruptcy, according to a recent report on The Chronicle of Philanthropy website (“Senator Questions Operating Practices of Nonprofit Hospitals, Asks for Changes,” March 21, 2006).

The investigation could lead to new requirements as to what constitutes “charitable care” and how much hospitals should charge for services and care to the poor and/or uninsured.

Other Reforms

Grassley has been at the forefront of the Senate investigation into nonprofits and has used his power as chair of the Senate Finance Committee to hold hearings on a number of charity issues. He has been the driving force behind the series of charitable reforms (including restrictions on certain types of in-kind gifts and new accountability requirements) that are included in the current tax reconciliation bill, H.R. 4297. AFP is urging members to contact their members of Congress and encourage them to eliminate the charitable reforms from the tax reconciliation bill.

The senator is not the only one investigating nonprofits hospitals. The IRS is also examining several issues related to these hospitals, including concerns about excessive compensation and if nonprofit hospitals provide enough benefits to set them apart from their for-profit counterparts and justify their tax exemption.

AFP continues to monitor these efforts and will inform members when action is needed. For more information, contact Jason Lee, director, government relations, at

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