NEWS FOR NONPROFITS

Nonprofit hospitals under the microscope

IRS and Congressional scrutiny of nonprofit hospitals has intensified in recent months. In July 2007, the IRS released an interim report on tax-exempt hospitals and its community benefit standard. On the same day, Republican staff members of the Senate Finance Committee proposed legislation that would force nonprofit hospitals to do whatever it takes to serve the uninsured.

Through the responses of 487 hospitals, the IRS gained “a unique and valuable insight into the manner in which hospitals report on and attempt to meet the community benefit standard,” according to news release IR-2007-132. The IRS found that hospitals vary greatly in the way they determine eligibility for uncompensated (charity) care. They also vary in how they measure bad debt expense and shortfalls between Medicare/Medicaid reimbursements and actual costs. Because of these variances, the next step for the IRS is to find ways to capture more meaningful data.

At the same time, the Senate Finance Committee proposal would require nonprofit hospitals to allocate at
least 5% of their budgets to providing charity care to retain their tax-exempt status. Additional requirements, such as having a written charity care policy and providing periodic assessments of local needs, would enhance charity care. •

“Cause” marketing — a growing trend

More nonprofits are recognizing the benefits of cause marketing — a form of partnering between a nonprofit and a business. For example, a company will promise to donate a dollar amount or sales percentage for purchasing their product. Both parties can reap huge benefits. The business will likely enjoy increased sales because, according to the 2006 Cone Millennial Cause Study, consumers trust a company more if it’s socially or environmentally responsible. The nonprofit will likely benefit by both receiving additional revenue and increasing its visibility.

If your not-for-profit is considering involvement in cause marketing, be aware that there are strict federal and state laws regarding such programs. Not only must you abide by Federal Trade Commission laws, but each state will also have its own regulations, with new laws being passed in increasing numbers. Be sure to consult with your attorney before becoming involved in one of these relationships. •

The current state of volunteerism

Recent Bureau of Labor Statistics data show that the number of Americans volunteering their time to charities has decreased — from 65.4 million in 2005 to 61 million in 2006. Why the decline? It may be due to a leveling off after the spikes in volunteerism that occurred after both 9/11 and Hurricane Katrina.

While the number of volunteers is decreasing, the value of each volunteer’s time is on the rise. An analysis by the Independent Sector Press estimates that, in 2006, an hour of volunteer time was worth $18.77, compared to $18.04 in 2005. •