Episode 3: What’s at Stake for Nonprofit Hospitals
In this episode of the “Achieving Health” podcast, host Chad Mulvany shares the latest healthcare policy and legislative updates for the week of June 30, 2025. He’s then joined by guests Amy Bibby and Mary Katherine Gleason from the Healthcare Practice at Forvis Mazars to discuss what’s at stake for nonprofit hospitals under growing scrutiny of their tax-exempt status.
CHAD MULVANY
On today's episode of Achieving Health, I've got the latest policy and legislative updates 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 Katherine Gleason, to explore what's at stake for not-for-profit hospitals under growing scrutiny of their tax-exempt status. Stay tuned.
ANNOUNCER
This is Achieving Health, a podcast from Forvis Mazars, where we delve into the topics that matter most to healthcare organizations across the continuum of care. Our goal is to help you navigate the dynamic healthcare landscape and achieve health at your organization. Here's your host, Chad Mulvany.
CHAD MULVANY
Welcome to Achieving Health. I'm Chad Mulvany, director in the Healthcare Practice at Forvis Mazars. Thank you for joining me.
Let's begin with today's Washington Watch segment, where I share updates on the most recent actions and discussion topics among federal policymakers and their anticipated impact on healthcare providers and payers.
Today's Washington Watch reflects information as of 8:00 Eastern Time on Monday, June 30th, 2025. My comments on these calls are based on what'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 information of this moment and will change.
As far as our conversation is concerned, we're going to provide an update of the One Big Beautiful Bill Act. Over the weekend, the Senate released revised text of the OBBBA and voted to begin debate on the bill. Moving to the Supreme Court, on Friday the court's decision in a case challenging a lower court's ability to implement nationwide injunctions in response to lawsuits challenging the administration's policies, could result in a fragmented policy environment for healthcare providers.
We also, on June 20th, had CMS finalize the 2026 exchange rule. Many of the rules most significant provisions are aligned with the House passed version of OBBBA. From HRSA, we also had it implement 340B cuts for FQHCs for certain drugs, and this is in line with the president's April drug pricing executive order. In the announcement, CMS changed the terms of HRSA grants for FQHCs, requiring the pass through the savings for certain 340B drugs to qualifying patients.
And finally, we are seeing some health plans incorporate increases in premiums as a result of the anticipated impact of tariffs on healthcare costs. 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 9:00 Eastern on Monday morning, June 30th. Obviously, with our limited time, we can't unpack everything that's happened over the last two weeks. And certainly there's a better than average chance that a lot of what we talk about this morning will have changed by the time this drops to your favorite podcast platform.
Late Saturday night, the Senate voted 51 to 49 to bring the revised version of OBBBA to the floor to begin debate. What I cover isn't intended to be a comprehensive summary of the provisions, but really more of a quick overview of key items and how we got here and also the state of play at this moment.
In terms of the impact, preliminary unreleased CBO estimates project that the revised Senate draft will cut Medicaid spending by $930 billion over a decade. This is up from over 800 billion in the House-passed version. The bill would result in 11.8 million more uninsured people by 2034 in the new analysis released over the weekend.
Please note that it is possible that during debate, additional amendments will be made to provisions impacting healthcare organizations, which will change the final impact of the bill. In terms of how we got here on Saturday night, the vote to begin the process of moving the bill forward in the Senate was held open for three hours to allow Senate leadership, Vice President Vance and President Trump to negotiate with those who were still on the fence.
Senators Paul of Kentucky, as expected, and Tillis of North Carolina, were the two ultimate Republican nos. Senator Johnson of Wisconsin was initially a no. But flipped his vote after securing agreement from leadership to back an amendment from Senator Scott of Florida that would save approximately $200 billion over ten years by bringing the FMap for the expansion population 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 individuals losing healthcare coverage. At this time, it is unclear if the amendment has sufficient support to make it into the final package. If it does, I think it's unlikely that the House would pass a bill that includes language eliminating the enhanced ACA match rate, though if the time delay is long enough, members of the House may view it as a problem that can be dealt with later.
In terms of process, the Senate final vote is likely to occur sometime later today, Monday, June 30th. Dems required the 940-page bill to be read aloud on the Senate floor, which took approximately 16 hours over Saturday night and into Sunday morning. After reading, the Senate allows for 20 hours of debate amongst the parties. Split evenly, the Dems use their full ten hours of debate to slow the process down, in hopes that constituents might convince enough senators to oppose the bill to sink it.
Debate wrapped up around two in 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 amendments and can drag on. This will begin, as I've mentioned earlier, at nine in the morning on Monday, June 30th.
In terms of next steps, while final passage is not assured. It is likely Senator Paul will not change his vote, and it's unlikely that Tillis will either, unless he secures major changes to the provider tax provisions. However, any change that puts him in the yes 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 commit to voting for the final package. And also, while Senator Murkowski of Alaska initially voted yes, when she did, there were two provisions in the bill that specifically benefited Alaska that have been subsequently 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 assuming Paul and Tillis are still nos. And not surprisingly, there are a host of other issues that are bubbling up.
Assuming the Senate version passes, it flips back to the House. Speaker Johnson has told members to be prepared to vote for the bill as early as Wednesday. While it appears that the deal negotiated on SALT caps has satisfied most Republicans from California, New York, and New Jersey, the phase down on the provider taxes will likely remain an issue.
Politico is reporting that as of Saturday afternoon, more than a dozen House Republicans have privately said that they will vote against the bill unless the provider tax provision moves closer to the one originally passed in the House. However, I will note that saying it in private is one thing; voting against the president's agenda is a completely different proposition.
In terms of that provider tax provision, it freezes provider taxes as of the date of enactment. For new taxes, the hold harmless threshold is set at 0%, including existing taxes applied to new classes for expansion states beginning in fiscal year 2028 and continuing through 2032. The threshold will be reduced by a half a percentage point annually until it reaches 3.5%. So for those keeping score at home in 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 note that the expansion state phase down does exclude nursing homes and intermediate care facilities. For non-expansion states, the hold harmless will remain frozen at the provider tax rate as of the date of enactment. As everyone's aware, the Senate parliamentarian ruled this provision extraneous last week and therefore ineligible to be included in reconciliation. However, Majority Leader Thune and Senate Finance Chair Crapo were able to fix it by delaying the start by one year, which also had the benefit of helping to secure support from moderates.
The revisions have subsequently been blessed by the parliamentarian, so there is no procedural issue here. Senator Hawley, who had initially expressed concerns about the provider tax provision in the Senate Finance Committee draft, now supports the bill, although he has said that he will work subsequently to delay the cuts.
The CBO estimate on the Senate version of the provider tax finds that it will save $191 billion over 10 years, which is more than double the $89 billion saved by House moratorium on provider taxes.
The Senate version also includes a requirement regarding the waiver of uniform tax requirement for the Medicaid provider tax, and this certainly reflects the language and modifies the HHS criteria that must be considered when determining whether certain healthcare related taxes are generally redistributive. This provision is largely unchanged from the House-passed version, and similar to the CMS rule proposed on May 12th.
In terms of state-directed payments, the Senate bill caps state directed payments at 100% of Medicare in expansion states and 110% in non-expansion states. It also temporarily grandfathers SDPs approved or where there was a “good faith” effort to be approved by May 1st, 2025. Revision in the Senate language includes removing a language allowing preprints to be submitted to the Secretary prior to enactment.
For payments for rural hospitals, if a state has approved or a good-faith effort before enactment of the legislation, the state directed payment may temporarily exceed the Medicare payment limits. Rural hospitals include those located in a rural area, treated as being in a rural area or located in a rural census tract, as well as critical access hospitals, sole community hospitals, Medicare dependent hospitals, low-volume hospitals and rural emergency hospitals.
Payments for non-rural hospitals are subject to the May 1st deadline for approval or the good-faith effort. The total SDP amount for hospitals in all states would be reduced by 10 percentage points annually, until the specified Medicare payment rate limit is achieved. Beginning with the rating period on January 1st, 2028.
For context, the House version grandfathered payments approved prior to enactment of OBBBA regardless of expansion status. It capped payments for new state-directed payments and expansion states at 100% of Medicare and 110% of Medicare for non-expansion states. And then under the House version, if a non-expansion state subsequently expanded, their new SDP would be capped at 100%.
While advocates for limiting state-directed payments point to their rapid growth as proof of a problem, there certainly is a bit of a flaw with this take. Over the last 15 years, as more states have shifted their Medicaid populations from fee-for-service, the supplemental payments for that population, so fee-for-service UPL, have declined in aggregate due to a smaller base. Much of the increased SDP spending is to replace UPL payments and other pass-through transitional payments that otherwise would have occurred had there not been a shift to Medicaid managed care.
While it is true that there has been some increase in spending due to SDPs, it results from where some states now use provider taxes to fund SDP rates above Medicare, thus increasing the federal share compared to UPL when it was capped at Medicare.
The Senate bill also includes, like the House bill, work requirements, and these would require individual Medicaid beneficiaries aged 19 to 64 who are not pregnant or disabled to meet certain work requirements. So beginning December 31st, 2026, the initial draft of the Senate Finance Committee OBBBA language delayed the start until no later than December 31st, 2028 to give time to implement. The new version pulls the date forward from the December 16th SFC draft to match the House language. In order to sort of meet the work requirements, individuals must engage in qualifying activities—so either work, community service, educational programs or job training for at least 80 hours a month.
The legislation would exempt, among other groups, parents, guardians and caregiver relatives of children aged 14 or under or a disabled individual. And it's also worth noting that the House-passed version exempted parents and caregivers of children or disabled individuals, or dependent children. So basically those up to 18 or under. It's important to remember that Arkansas' experiment with work requirements led to a 25% disenrollment rate, or approximately 18,000 individuals, for the applicable population.
Medicaid beneficiaries often struggle to meet work requirements due to complex and burdensome reporting systems that are difficult to navigate, especially for those with limited access to the internet, unstable employment, or those who work multiple jobs or in the informal economy. Many are already working or qualify for exemptions, but still risk losing coverage because of confusing rules and administrative red tape.
Georgia's recent implementation required a $50 million investment in administrative staff and system upgrades. Given that cost, the funds allocated in the Senate bill to help states implement this in a very short time frame are woefully inadequate.
Like the House passed version, the Senate version includes a reduction in the FMAP for states that provide coverage to undocumented adults. And so what it would do is lower the FMAP from 90% to 80%. For those states that choose to provide coverage using state-only funds, this was originally ruled as extraneous by the parliamentarian. However, it appears they were able to cure this defect by correcting a statutory cross-reference.
Additionally, due to concerns about the impact of both the phase down in provider taxes and state-directed payments, a rural Health transformation program has been added to the Senate version of OBBBA and the language released Saturday morning includes a fund that provides $25 billion, which is phased down over five years, and so in Fed fiscal ‘28 and ’29 it would provide 10 billion. In 2030 and 2031, it would provide 2 billion.
States would need to apply to CMS to receive the funds from the program, and the funds would be distributed equally, or half the funds would be distributed equally to states. So states like California, Texas, New York, Florida would get shortchanged because they are larger states with 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 distributed to states based on a procedure to be determined by the CMS administrator. The allocation procedure would consider a state's rural population, proportion of healthcare facilities in rural areas, and the situation of hospitals who serve low-income patients.
States would be required to have an approved application to receive funds, and then the funds could be used for three or more of the following related activities: promote interventions and technologies to improve prevention or management of chronic disease; pay healthcare providers for specific items or services as defined by CMS; provide training and assistance for the adoption of technology enabled solutions that improve care delivery in rural hospitals; provide assistance software and hardware for significant information technology advances designed to improve efficiency, enhance cybersecurity capability, and improve patient health outcomes; recruit and retain clinical workforce talent to rural areas with commitments to serve rural areas for a minimum of five years; assist rural communities to rightsize their healthcare delivery systems by identifying needed preventative, ambulatory, pre-hospital, emergency, and acute inpatient care, outpatient care, and post-acute care service lines; support access to substance use disorder treatment; support innovative models of care that include value-based care arrangements and alternative payment models; and then also additional uses designed to promote sustainable access to high quality rural healthcare services, as determined by the administrator.
The Senate version of the OBBBA also has a moratorium on the implementation of long-term care staffing ratios, and so it would prohibit the HHS Secretary from implementing them from the date of enactment through September 30th, 2034. However, it's worth noting that over the weekend this provision was nixed by the Senate parliamentarian, 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 fix for the physician fee schedule. The version released over the weekend includes a temporary Medicare physician payment increase for 2026, which provides a 2.5% increase to the physician fee schedule for services provided from Jan. 1 through December 31st, 2026. We'll note that this is slightly different from the House-passed version, which would have increased the physician fee schedule conversion factor by 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 Committee language released on June 16th or the bill released over the weekend, it does not include a three-year delay of the ACA DSH cuts, which were included in the House-passed version. So unless there's an amendment or subsequent legislation in the 2026 federal funding bill, hospitals are facing an $8 billion cut in Medicaid DSH that would be effective beginning October 1st, 2025.
Moving to the Supreme Court, the Supreme Court on Friday allowed the Trump administration to take steps to implement its proposal to end automatic birthright citizenship. The constitutionality of the administration's birthright citizenship policy or executive order wasn't the issue in question. What the court did was grant a request by the Trump administration to narrow the scope of injunctions imposed by lower court judges, so that they only apply to states and groups of individuals that sued. However, in writing the majority opinion, Justice Amy Coney Barrett indicated nationwide injunctions are limited only to the extent that the injunctions are broader than necessary.
The ruling also instructed the lower courts to move quickly to determine how broad injunctions can be. The ruling in favor of the administration now creates the situation where you could have a fragmented policy environment or healthcare providers. For plaintiffs in states that successfully challenge the president's policies, implementation of that policy will be blocked subject to further court proceeding when a judge issues an injunction. Everywhere else, the policy would move forward. And so obviously, you can think about kind of where the immediate concerns might be here.
You think back to the attempted OMB grant freeze for review with presidential priorities, which was stopped by a nationwide injunction that would certainly have an impact on CHCs and also the attempt to cap NIH grant indirect costs at 15%. That was also stopped by a nationwide injunction and could have a pretty significant impact on major teaching hospitals. We'll have to see what happens when the lower courts review their injunctions in the light of Friday, June 27th’s Supreme Court ruling.
Also noted that CMS on June 20th finalized the exchange rule for 2026. CMS estimates that between 725,000 and 1.8 million individuals will lose marketplace coverage in 2026 as a result of the policies in the finalized rule.
Please note that what follows is not a comprehensive summary, but just key provisions. And so, among other changes, the rule eliminates the low-income monthly special enrollment period, or SEP, and CMS temporarily ends the SEP for those with projected household incomes at or below 150% of the FPL, effective 60 days after enactment of the rule through the 2026 plan year.
In terms of eligibility verification for a special enrollment period, CMS reestablishes pre-enrollment eligibility verification for all types of SEPs on the federal marketplace. Since the 2023 Notice of Benefit and Payment Parameters, pre-enrollment verification was limited to the loss of minimum essential coverage SEP. In addition, all federally facilitated marketplaces must conduct pre-enrollment eligibility verification for at least 75% of new enrollees.
However, worth noting that CMS did not finalize this specific change for state-based marketplaces, and these changes also will sunset at the end of the 2026 plan year. In terms of the tax filing requirement, the rule temporarily reinstates a policy deeming an individual ineligible for future premium tax credits if they fail to file their federal tax income return and reconcile premium tax credits for one year.
The policy was changed to two consecutive years in the 2024 Notice of Benefit and Payment parameters and this policy sunsets after the 2026 plan year.
In terms of income verification, this temporarily requires marketplaces to verify income with other trusted sources of data if IRS data is not available, including requiring additional supporting documentation or action by enrollees and this policy also sunsets after the 2026 plan year.
Another piece on income verification: it temporarily requires all enrollees who attest to projected household incomes between 100% and 400% of the FPL, but whose income verification results in a household income below 100% FPL to answer additional verification questions and provide supporting documentation. This policy is intended to ensure only eligible individuals above 100% of the federal poverty level receive premium tax credits.
The rule also shortens the time frame to resolve inconsistencies, and so it removes the 60-day extension of the statutorily required 90-day window, during which enrollees must resolve inconsistencies. In terms of pass-through premiums, it allows insurers to require enrollees to pay past due premiums before enrolling in new coverage, and for $0 premiums, it temporarily changes the eligibility redetermination process for the 2026 plan year for enrollees in $0 plans. These enrollees are required to affirm or update their eligibility information or face $5 premiums upon re-enrollment. The premiums will be eliminated once the enrollee confirms eligibility.
Want to shift gears now and talk about HRSA. And so, on Tuesday, June 26th, HRSA announced that it updated award terms for FQHCs, requiring HRSA-funded health centers to provide insulin and injectable epinephrine to low-income patients at or below the price paid by the center for those drugs acquired through the 340B drug pricing program. And this change is a direct result of the president's April executive order on drug pricing.
The announcement encourages FQHCs to implement the updated award terms immediately to ensure full compliance and maximize patient benefit. Given this was part of the president's drug pricing executive order, it is not a surprise that they've moved forward with this. Beyond the increased cost for FQHCs, which will degrade margins, this requirement will likely be difficult to administer given the need to identify which individuals should receive the pass-through discount, and the margin degradation will likely impact the ability of FQs to continue providing certain services and result in staffing reductions for some providers.
Last thing I want to cover is tariffs, or the impact of tariffs, on health plan premiums. Axios is reporting that plans are notifying states that tariffs will drive up premiums for individual and 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.
Both plans are attributing approximately three percentage points of the double-digit premium increase to projected costs associated with anticipated pharmaceutical tariffs. However, important to note that not all plans are incorporating a swag for tariffs, and the article cited a couple of plans in Oregon that had elected not to bake this in.
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 asking for an additional rate bump to account for tariffs related to supplies and drugs. In theory, that 3% bump that the two plans mentioned in the article or asking for should be pure pass-through to the provider, since it's going to be the provider that's absorbing the cost of the tariff.
Second, it's not just tariffs driving up premiums, 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 adverse selection for participating plans. And I think it's safe to say that many of the provisions in the finalized exchange rule for 2026 will have the same effect.
This concludes today's Washington Watch. Next, I'll be joined by Amy Bibby and Mary Katherine Gleason to talk about what's at stake for not-for-profit hospitals.
CHAD MULVANY
I'd like to welcome our guests for today's episode, Amy Bibby and Mary Katherine Gleason. Amy is a partner in the Healthcare Practice at Forvis Mazars. She leads a team of professionals dedicated to serving nonprofit hospitals and other tax-exempt organizations, focusing on tax compliance and consulting. Mary Katherine is a manager in the Healthcare Consulting practice at Forvis Mazars. She focuses on strategic planning and market assessments, including community health needs assessments for nonprofit hospitals. Amy, Mary Katherine, thanks for joining us here today.
AMY BIBBY
Thank you for having us.
CHAD MULVANY
I'd like to start by asking each of you to share a little bit of your work that you do with healthcare organizations, and what led you to this field, and maybe, Amy, we can start with you.
AMY BIBBY
Sure. Yes. I really began my 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 and decided to specialize in healthcare early on. And that's where I spend the vast majority of my time today.
CHAD MULVANY
Well thank you. That's great. Mary Katherine, same question to you.
MARY KATHERINE GLEASON
Yes. So, I fell into consulting—was not the plan that I had, but I come from a long line of clinicians and quickly realized that that was not the path for me. So, I joined, you know, Forvis Mazars through our analytics team originally. And my goal there was learning and prioritizing dashboards, applying the insights to it, to the strategic planning team at the time.
Now since integrated into that strategic planning team where I still can what I say, I can speak programmer, but I can also speak CEO. So trying to straddle that conversation between the two of, you know, a service line, enterprise, market assessment, planning, relying heavily on the data, but moving more into some of these more strategic spaces.
CHAD MULVANY
Well that's great. You know, a lot of what you both said about your experiences resonates with me in my past. You know, when I was thinking about what I wanted to do when I “grow up,” I wanted to have an impact and improve communities, which I think really speaks to 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 clinician was just off the table, which is how I ended up in healthcare management and health policy. So that's just kind of funny how and, you know, it seems to be a common thread that connects everybody that we work with.
So in terms of getting into our discussion today related to tax-exempt hospitals, and this is, you know, over the last ten years, if you think about it, we've seen increasing scrutiny of tax-exempt hospitals. And while there was a little bit of a break during COVID because of healthcare heroes, it didn't take long for that period of grace to fall apart. And so we see the same scrutiny of anecdotes about organizations collection practices pop to the surface.
And really, it's at a point now where we've seen letters from Grassley and Warren and other senators to the IRS result in 35 not-for-profit hospitals currently having their 990s being scrutinized. It was certainly changes to tax-exempt status or tax-exempt bond 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 up, particularly given how those findings from the 990 review comes out.
Just kind of using that as a background wanted to kind of get from both of you. Your experience on how potential changes to tax-exempt status might impact nonprofit hospitals and their role in helping communities achieve health.
AMY BIBBY
Yeah, I'm happy to kind of dive in a little bit there, because tax status is really a central part of this conversation. And that 501C3 exemption is via our Internal Revenue Service. And then our states typically extend tax exemption and outside of income tax exemption, there's a lot of other benefits. You mentioned tax-exempt bond financing and 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 that a little bit. But really, the elevation of that bar, and requiring more of the tax-exempt hospital sector, you know, I think part of the issues that I'm seeing are really around ensuring that hospitals are putting their best foot forward.
So much of what we're talking about is public documents. It's information on things like a form 990, information on organization’s website even. And so ensuring, you know, really step one that those things are out there. They are, you know, correct. And ensuring that the organization is putting itself in the best light is just really important. You know, revocation or not having that tax-exempt status, would be very detrimental to 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 kind of trickle effect for property tax exemption, sales tax exemptions, you know, all the way down to, more minor things like postal rate preference, preferential rates, so that the effects would, would be quantifiable, but it would be very significant just in some of those major buckets.
MARY KATHERINE GLEASON
Yes, I agree, and I really like your comment on putting your best foot forward, because I know that a lot of houses are putting efforts into achieving health as a broader bucket in so many different areas of their organization. So sometimes that in lives, in the strategic planning, sometimes that's in the, you know, more traditional community health arm.
And I think what the IRS is kind of pushing on a little bit is that, you know, prior cycles the CHNA for a lot of organizations, which kind of ties into that plan for achieving health in the community was more of a compliance piece. Right. And so now as you're seeing this emphasis, you're starting to see roles getting carved out to within organization who's trying to get their arms around that.
You're seeing the trends of value-based care, getting dedicated resources and 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 down within organizations and how they're starting to make some changes of how they think about managing their populations rather than just the patient experience and the four walls of their hospital.
CHAD MULVANY
You know, Amy, thank you for raising up the state and local issues as well. You know, I think we have seen states and localities go after specific hospitals, not-for-profit status and in unique circumstances. And now we've seen Governor Braun in 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 systems if they don't reduce their commercial rates down to something more in line with the state average by 2029.
So certainly a lot of risk in the environment. As we think about how hospitals and health systems manage that state risk, that federal risk, where should they focus their attention to help preserve tax-exempt status?
AMY BIBBY
Yeah, I would say, you know, my first kind of, the lowest hanging fruit, I would say is let's not miss the easy stuff. Let's make sure that the website has 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 policy is on the website in multiple language.
We know so much of 501R is around transparency and ensuring that the information is out there to patients. So let's not miss the bar on making sure that we're making that information available. That on a form 990 where we're being judged as to whether or not we're complying with 501R that we're answering those questions in 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, we provide a calculated, you know, tangible benefit to our community through financial assistance and charity care. That all-important computation on page one of Schedule H. Again, that's how we are often compared to other hospitals as to how much we're doing to give back to deserve that tax-exempt status.
So let's not miss the easy stuff, right? Let's not miss the things that we have under our control. Make sure we're capturing that data, efficiently and effectively so that in our reporting, we're not again, kind of putting ourselves at a disadvantage.
MARY KATHERINE GLEASON
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 recommendations that Amy's outlined so much more feasible and efficient. If you put the effort in on the front end to have some discipline around tracking and measuring the efforts. And obviously there's a certain amount of that that stands today. But when you think about opportunities to protect the status and to build that airtight case, one thing I reached for quite easily is the implementation plan component of the Community Health Needs assessment.
It is quite literally an implementation plan that requires strategy, tactics, timeline, the resources that you're dedicating to achieving that strategy or tactic, ownership. And what I would argue as best practice as far as implementation goes is, you know, measures of success and planned outcomes. And so if you're tracking all of that and really managing against, an implementation plan that's got some rigor around it that ideally kind of reflects your strategic plan, then it makes your tax team, it makes tracking down the numbers.
It just takes the resource allocation process and effort down a couple notches. If you're putting the effort on the front end. And then the second piece, I'd add, because I wouldn't be a good consultant if I didn't have a point B comment is, you know, how you're educating and communicating the efforts you'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 audience understands what you have to offer, even outside of kind of the financial pieces of services, programs, and then use your CHNA that you've already conducted to see what the barriers might be as to why they cannot access those services.
And so use it as a retrospect of an introspective opportunity to make ways over those barriers, if it's accessing services or financial assistance or the language barrier, and address it. And then kind of tied with that relationship, I'd say engage your community from a partnership perspective. Hospitals are hospitals. They're wonderful at taking clinical care of patients and people holistically.
But there are a surprising amount of hospitals that conduct their CHIP in a vacuum. They're not looking to partners in the community that they could engage to help address, maybe a larger health issue. And part of what that does is creates visibility for the hospital's efforts in the broader business community. But it also builds advocates and a referral system within the community for people to come and access services.
And the more you do that, the more the hospital really does become an anchor of the community for so many more needs and services than just those inpatient clinical stays, which is what we frequently think about.
CHAD MULVANY
You know, Amy, you mentioned financial assistance. And certainly like if we think about what's going on in Congress today, and granted, this may not be true by the time people hear this podcast, but a lot of the measures under consideration as part of reconciliation could result in a significant number of uninsured, possibly up to 8 million, as a result of the Medicaid changes by 2034. You add in the exchange changes, plus the sunsetting of the enhanced exchange subsidies that gets up to 14 million by 2034. Based on your experience, where do hospitals have opportunities to improve their financial assistance policies?
AMY BIBBY
Yeah, I think there's a few kind of key things that hospitals need to be aware of as they are revising financial assistance policies, not just the written documents, but their procedures around it. I would say first and foremost is really understanding financial assistance versus bad debt, right? And understanding what the criteria is for financial assistance. To the extent, there are presumptive charity care provisions within the policy.
Oftentimes I see hospitals have presumptive measures, but they don't make their way into the policy itself. So understanding presumptive measures, including those in financial assistance, we want to make sure that what we're doing counts. Right. And then also, there are some aspects of our overall disclosure to the IRS and to the public. And what figures into that really important computation that I think also often gets overlooked around subsidized health services.
It's often overlooked. These are services that are provided despite financial loss 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 shares and that type of thing that, you know, we're trying to gain a competitive advantage and just may happen to operate at a loss the first few years. Right? 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's commentary around really kind of understanding and, 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 including things, you know, neonatal intensive care is a common example of subsidized, healthcare services, inpatient psychiatric unit, you know, so we I do see a number of facilities that just really kind of don't take full advantage of the rules and regulations to ensure that they're getting credit. Again, for all of the costs that are truly wrapped up in to providing that needed care to the community.
CHAD MULVANY
You touched on the other piece about, you know, you've got the financial assistance policy, but what have you seen organizations do beyond presumptive to improve communication and uptake? Because I know that's a constant struggle that even high performing organizations struggle with.
AMY BIBBY
The Community Health Needs Assessment is a really great way to engage, right? I see many organizations that partner with other agencies, other hospitals in the area that really provide a really robust, community-engaged assessment process and implementation strategy process. I'm glad you mentioned that, Mary Katherine, that's so important. I just think that that is, and was intended, to be a key way that hospitals engage with their community and taking advantage of that opportunity, around the needs assessment is, I think, just a key way to make that happen.
MARY KATHERINE GLEASON
I would add on, as you're kind of touching about that CHIP process of development, like I said earlier, partnership is critical to this. You know, you don't want a hospital system developing a transportation system just as much as you don't want your transportation system performing open heart surgery. So let's let organizations be experts in their fields and then partner with one another and leverage each other's strengths.
And so I would say kind 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 upfront but also revisit it. No implementation plan can live viably when it sits on the shelf and collects dust. What it really needs, and this is best practice that every organization should be doing with implementation plans. Pull it out quarterly, pull it out annually or even biannually.
I'd be happy if some organizations did that and take a look at what strategies are working, what are not working, what is worth the investment, what's not worth the investment, and allow the plan to be agile and flex with your organization, flex with your community's needs.
I think about, you know, Appalachia and Hurricane Helene is that—overnight—dramatically changed what their community health looked like for those communities and what the top needs look like. And so, having the partners engaged in that conversation just further supports that communication going back and forth when you're pulling it out annually, taking a second look 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?
AMY BIBBY
Yeah, I appreciate you underscoring the difference there between the needs assessment and 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 of what we're going to do about it. Right.
And that is an area that I've seen an increased, interest in IRS audits of 501R compliance. The first few rounds, the first few years, they really, frankly, were learning themselves what an implementation strategy was all about. And the fact that it was even required within the regulations. Now they've got it down, right? And they're understanding that the implementation strategy is 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 what the needs are, what we've all planned together to do to address those needs.
CHAD MULVANY
Great. You know, we've talked a little bit about like, steps hospitals can take to uncover new opportunities. We've also talked a little bit about how to incorporate information from the community health needs assessment into strategic planning. But Mary Katherine, would be interested in kind of getting your perspective on how hospitals can create a budget for community benefits investments that are aligned with these strategic goals.
MARY KATHERINE GLEASON
Yeah, that's a great question. And I would also love Amy weighing in on it from a very practical perspective. But what comes to mind, and I know I keep harping on this, is have the rigor around your implementation plan and engage your strategy team in, early in the process.
So like Amy said, you know, so much of the Community Health Needs Assessment is the data. It's engaging the community voices. It's looking to see where are their needs that 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. This is what they're doing. They're just doing it from a different perspective within the hospital.
So I would encourage organizations to bring their strategy team into the CHNA development process and 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 it with your strategic planning process.
We really ideally like to see that happen before you start your, well, we can call it annual, but, you know, your larger strategic planning effort, cycle. And the reason why that kind of ties into this in a budget perspective is obviously there's components that can be allocated towards community benefits and be included on your 990.
But there's also other strategies that, when there's the understanding of having the community health piece of it may actually overlap with some of the strategies within the organization and be a desired area of spend and investment, even if it's not able to be allocated towards community benefit. And so that's part of the reason why we're thinking about that budget is track those staff hours, track the dollars you'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 something that you can look back to.
And like I said early on, that rigor around your implementation plan, regularly revisiting it. And if you have a PMO thinking about putting a PMO kind of over this would really help that documentation that sets the budget, goes for approval at the board and also engages the board. Some understanding the ways that the hospital is intentionally attempting to invest in the community, that may not always match bottom line goals.
AMY BIBBY
I think all of that is spot on. I would add, you know, their understanding and capturing the data is just so important. Making that investment, I think is just so important. I would also just kind of flip the coin a bit as a different way for hospitals to think about this. You know, we know now that there is not a stated threshold for 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, but the IRS has really remained silent on establishing thresholds.
And Chad, you mentioned at the beginning of our discussion around Senator Grassley and Warren's latest letters that really focus on establishing some of those floors. So I do think that that is something that hospitals should prepare for. 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 that there is a reverse way 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, subsidized healthcare, all of the other categories that count.
You mentioned other things, Mary Katherine, around some of the community activities around, health fairs and those types of things. So make sure that we are, you know, being proactive 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 believe it's prudent for us to plan for, having some required thresholds, potentially, in the near-term.
CHAD MULVANY
Mary Katherine, I wanted to pick up on something that you mentioned through the process and involving the board in the process. What I like about that, or I guess the double word score is, is in the process of sort of bringing the board into the budgeting process and the targeting process in helping them understand what the organization is doing.
You're also helping enable them to be advocates for you because they're community leaders, they're out in the community. And so they have a good understanding of what the organization is doing. They can tell their peers. They can tell other community leaders about the great work the organization does. So I think there's a knock-on effect there that shouldn't be underappreciated.
What else—you know, we've talked a little bit about communicating what the organization is doing—how else have you seen organizations educate policymakers, legislators, community leaders and other stakeholders about the benefits that a tax-exempt organization is providing?
MARY KATHERINE GLEASON
Yeah, that's a great question. And I think that ties nicely into Amy's comments about being forward-looking, as I think that this is because of some of the change in landscape and temperature in this area. Organizations are starting to think about it.
So I would say, probably don't have a ton of case studies looking back at where they've necessarily done it well, but really thinking to the future about it, which is where partnerships have come up much more and being those advocates. The second piece that I was thinking about earlier, you know, is leveraging the old adage of making your boss look good. You know, hospitals in this situation, you know, the federal government in many ways is the boss when we kind of think about this. And the board members obviously are too, to a certain extent, but I think the principle remains, as we think about the work that we do is, right, like, bring humility, bring the good work, the excellent work to the table. But don't be shy about 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 intern in a congressional office, is, I don't think the community realizes that there are caseworkers available through their congressmen and women to be able to provide services.
Usually that's through obviously, government organizations, but it's not uncommon for me to receive a call during that internship of someone seeking help or a service that was not something that the congressman's office offered, but there was someone in the community who dropped by a flier. I had it on the desk and was able to share it.
And so, I think one thing is: educate your public, local public leaders, educate your legislative leaders on a state and federal level of the work that you're doing. Invite them to tour. But I think also two is: give their staff the resources and educate their staff on it because it really at the end of the day, those are the people on the front lines impacting 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 with this hospital that was able to meet my needs. They were able to, you know, provide services I couldn't afford. Then that obviously got elevated and made the boss look good in that situation. So I would say look for opportunities to do that, build ongoing relationships, in the community so that your advocates are not just yourself.
AMY BIBBY
Yeah, all of that is spot on. I would just add also leverage your state association relationships, whether it's the state hospital association, AHA, HFMA. Use those networks to talk to your counterparts. Some of them may in other discussions be considered competitors. But in this respect, we're all in this together, so understanding their struggles and, ensuring that it is, you know, that we are all, taking advantage of, of our combined, expertise in, in how we serve our communities.
And we all have quite the network, even within our state of other, facilities that are likely in very similar situations. So, encouraging and driving those conversations at our association level, I think that's also another way to increase that communication. They often have direct communications with legislators. So ensuring that those communication lines are very open and well-supported by your organization and by other organizations in your area.
MARY KATHERINE GLEASON
Amy, your comment made me think about the health departments, which we've not touched on very much, but that's another, you know, core component that if you are struggling to figure out the health needs of your community, the health department will be happy to help you figure it out. But on the flip side, they can also be a great place for resources and connections, referrals as it relates to some of these particular services.
But, they can also help you identify areas where the community desperately needs new services that you as a hospital system may be better positioned than them to offer the service. And there may also be community benefit, advantage, and further demonstration of commitment to the community.
CHAD MULVANY
Fantastic insights. You know, as we're wrapping up the conversation, if you both had to give health system executives one piece of advice related to not-for-profit status or preserving their not-for-profit status, what would it be?
AMY BIBBY
I would say, again, coming from the tax person on the call, take a look at your 990, know what's on there and ask lots of great questions.
MARY KATHERINE GLEASON
I would take this strategy and lean into that implementation plan theme I've been saying all along is document, have clarity, allocate your resources and be your own advocate in the conversation around the value that you bring to your community.
CHAD MULVANY
Amy, Mary Katherine, thanks again for joining me today and sharing your insights. And thank you to all of our listeners for tuning in. If you'd like more insights related to nonprofit hospitals and tax-exempt organizations, we have links to some related FORsights in the show notes. I hope you'll join me in two weeks for the next episode of Achieving Health, and hope you stay well until then.
ANNOUNCER
You can follow Achieving Health on your favorite podcast platform or visit forvismazars.us/AchievingHealthPodcast to learn more. New episodes are released the first and third Wednesday of each month. Achieving Health is produced by Forvis Mazars LLP, an independent member of Forvis Mazars Global, a leading global professional services network, ranked among the largest public accounting firms in the United States. The firm's 7,000 dedicated team members provide an Unmatched Client Experience through the delivery of assurance, tax and consulting services for clients in all 50 states and internationally through the Global Network.
The information set forth in this podcast contains the analysis and conclusions of the panelists based upon his her or their research and analysis of industry information and legal authorities. Such analysis and conclusions should not be deemed opinions or conclusions by Forvis Mazars or the panelists as to any individual situation as situations are fact specific. The listener should perform their own analysis and form their own conclusions regarding any specific situation. Further, the panelists conclusions may be revised without notice, with or without changes in industry information and legal authorities.