Complaint Filed With IRS by Advocacy Groups Charges Hospital Shuns Charity Obligations

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By Peyton M. Sturges

Aug. 28 — A complaint filed with the Internal Revenue Service Aug. 25 charges Jackson Health System, a public hospital system operating in Dade County, Fla., with failing to comply with charity care obligations under the Affordable Care Act.

The health system, according to the administrative action initiated by the National Health Law Program (NHeLP) and Florida Legal Services (FLS), has neglected its obligations under Internal Revenue Code §501(r), which requires most tax-exempt hospitals to take actions to better serve their communities; revise and publicize their financial assistance policies; and reform their billing and collection practices to ensure that the poor and uninsured have access to the health-care services they need.

The complaint, the first filed with the IRS by advocacy organizations representing low-income people, specifically alleges that Jackson is violating ACA requirements governing nonprofit hospitals' billing and collection policies for low-income patients. Other nonprofit hospitals across the country and in Miami have posted their financial assistance policies on their websites and engaged community representatives in conducting community health needs assessments (CHNAs), yet Jackson has failed to do so, the complaint alleged.

Hospital spokeswoman Lidia Amoretty, who declined to comment directly on the complaint, forwarded an Aug. 26 letter from the hospital's president, Carlos A. Migoya, to the Public Health Trust Board of Trustees, which oversees the hospital's operations. That correspondence said the hospital believes it is meeting its charity care and community outreach obligations.

Attorneys who spoke to Bloomberg BNA Aug. 28 said the complaint may focus public attention on perceived inequities of the health system's financial assistance, billing, collection and community outreach and support practices. For several reasons, however, the complaint isn't likely to result in action by the IRS, they predicted, because there are uncertainties concerning whether Jackson, as a governmental or public hospital operator, is subject to the ACA provisions.

Refusal to Expand Medicaid

Sarah Somers, managing attorney at NHeLP, said the complaint is designed to focus the IRS's attention on Jackson's lack of compliance with 501(r) provisions designed to ensure all citizens have access to the care they need, regardless of ability to pay.

Attorneys tell Bloomberg BNA the complaint isn't likely to result in action by the IRS because there are uncertainties concerning whether Jackson, as a governmental or public hospital operator, is even subject to the ACA provisions.

“Congress took a much-needed step to ensure that people are aware of these financial assistance programs and that they are not deterred from seeking that care because of unreasonable billing practices,” Somers said in an Aug. 27 statement. “These new requirements help advance the ACA's goal that all citizens and lawful residents have access to affordable health care, and those requirements must be enforced.”

The complaint claims that many low-income Miami-Dade County residents who receive care at Jackson “are completely unaware of the financial assistance program until they seek legal assistance for medical debt from their treatment.” As a result, county residents who would otherwise qualify for free or reduced-cost care under the hospital's financial assistance program have been subjected to collection actions for the medically necessary services they received.

The complaint also says that, because of the hospital's alleged violations, “many of these uninsured patients will likely continue to believe that they cannot receive services and may either forgo necessary medical care to avoid medical debt or be subjected to billing practices that violate the ACA.”

Miriam Harmatz, a senior health law attorney with FLS, said her organization appreciates that Jackson provides a critical function as a safety net and has limited resources. Nevertheless, “it needs to ensure that people who are eligible for this county-funded care can actually get it,” she said.

She noted that “virtually all of the low-income uninsured county residents who are experiencing difficulties with the hospital would be eligible for Medicaid—with virtually all of the cost covered by the federal government—if the Florida Legislature would just accept federal funding.”

According to the complaint, more than 165,000 individuals who would have been eligible for Medicaid coverage under the ACA are in the “coverage gap”—too much income to be eligible for Medicaid but too little to qualify for subsidized health insurance—because of the state's decision not to expand Medicaid.

The hospital letter, however, lamented the groups' filing, saying the complaint was filed “despite ongoing conversations between our agencies about addressing some of their concerns.” It noted that Jackson provided $365 million in charity care during FY 2013-14, reflecting approximately 212,000 primary care, specialist and emergency room clinical encounters that weren't billed to patients.

“Jackson's mission promises a single high standard of quality care,” the letter said. “We have consistently acted to protect and enhance that legacy. Rest assured we will continue working with civic leaders and community stakeholders to ensure Jackson's charity-care program lives up to our collective expectations.”

Complaint Flawed?

Gerald M. Griffith, Jones Day, Chicago, said the complaint may bring some attention to the groups' concerns, but it might not result in an official IRS investigation or enforcement action. “Even if it does, we may never hear about it,” he said.

He noted that, although there is no private right of action to enforce Section 501(r) or any other part of the Internal Revenue Code, that isn't what is going on in this case.

“Private parties can be tax law whistle-blowers, but the government decides whether or not to prosecute the case,” he said. “The IRS has a couple of routes for doing this and the one these groups are using, Form 13909, has been around for several years.”

Griffith said that the IRS considers complaints but typically doesn't publicize specific actions on them due to the protected nature of taxpayer information. “It's up to the IRS to sort out whether there is a problem,” he said.

“Also, Section 501(r) only applies to 501(c)(3) hospitals, which include dual status hospitals—public or government-run hospitals that have obtained 501(c)(3) status in addition to their existing exemption as a governmental entity,” he said. “If Jackson Health is a public hospital that has not been recognized as a 501(c)(3) organization, then Section 501(r) does not apply,” Griffith said.

“The bigger potential impact may be in a public relations battle or in any attention the situation may garner in Congress,” he said.

Harmatz, however, disputed the notion that public hospitals aren't required to comply with Section 501(r) directives. “It is, at best, an open question given that final 501(r) regulations have not been issued and that comments on the IRS's proposals have explained that the ACA supports holding public hospitals to the same charity care and community engagement standards as other exempt hospitals,” she said.

She noted that other public hospitals have prepared and posted CHNAs and have adopted and publicized financial assistance policies. Moreover, “Jackson Health has at no time in the ongoing discussions we have had with it suggested that the ACA's requirements related to tax exempt hospitals do not apply to its operations,” Harmatz added.

 To contact the reporter on this story: Peyton M. Sturges in Washington at

To contact the editor responsible for this story: Janey Cohen at

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