Holland & Hart Healthcare Law Blog

VIRGINIA HEALTHCARE LAW DECISION: CAN CONGRESS REGULATE ECONOMIC INACTION?

      Judge Hudson’s decision invalidating Sec. 1501 of the recent health reform bill, the “Accountable Care Act” or “ACA” in Commonwealth of Virginia v. Sebelius, in the U.S. District Court for the Eastern District of Virginia, addresses the key question as to whether Congress can regulate “economic inactivity” under the provisions of the Commerce Clause of the Constitution. The inactivity is of course the action by individuals in not obtaining mandated health insurance under the ACA and the regulation is the imposition of excise taxes upon those who fail to obtain the required insurance. There are no specific precedents that directly address this issue although logical arguments can be made on both sides.

 

ANOTHER STATE TAX EXEMPTION DECISIONS SEPARATES FROM “LIBERAL” FEDERAL DEFINITION OF CHARITABLE PURPOSE.

 

With perhaps some eye toward the Illinois decision in Provena Covenant Medical Center et al. v. Department of Revenue, 2010 WL 9668858 (2010), an Ohio appellate court affirmed the denial of property tax exemption to a dialysis company that had been granted a federal Section 501(C)(3) tax exemption, finding that the liberal standard adopted by the IRS had no impact on Ohio tax exempt statutes and precedent.    The case, Dialysis Clinic, Inc v. Levin, Slip Op. Ohio 5071 is a direct appeal from the Ohio Board of tax appeals.  The case is of interest because it reflects the direction in which Sen. Grassley and others have been pushing nonprofit hospitals in the Patient Protection and Accountable Care Act enacted into law in March of this year.

 

BRING ENOUGH “CHARITY” IN HUNT FOR HOSPITAL TAX EXEMPTION?

 

Robert Ruark, the novelist and big game hunter, used to encourage his fellow hunters to “use enough gun” when hunting dangerous animals.  If the reasoning of the Illinois Supreme Court recently in Provena Covenant Medical Center V. Department of Revenue 2010 WL966858 (2010) gains traction beyond the state court ruling on local property tax exemptions and spills over into the analysis of federal and state income tax exemptions, not-for-profit hospitals may be in for some rough sledding with the Internal Revenue Service and Sen. Charles Grassley (R) Iowa.  Senator Grassley who inserted the enhanced “community benefit” requirements into the Patient Protection and Affordable Care Act enacted last fall has been anxious to hold non-for profit hospitals accountable for the very lucrative tax exemptions that they receive under the Internal Revenue Code.

 

NON PROFIT HOSPITAL CHARITY CARE “OUT OF THE CLOSET” WITH PPACA?

 

 

Sen. Charles Grassley (R) Iowa, arranged to insert language in Section 9007 of the Patient Protection and Affordable Care Act, the health reform bill signed into law in March of 2010 that requires not for profit hospitals to adopt and disclose financial assistance policies for the medically underserved who are not covered by insurance. The American Hospital Association has long argued that mandatory charitable care disclosure policies are unnecessary and that the need can be met through voluntary disclosure procedures.

GREGORY R. PICHE’ TO ADDRESS NATIONAL FORUM ON CLINICAL INTEGRATION.

 

Gregory R. Piche’ will speak on the subject of avoiding tax liability in the clinical integration of tax exempt organizations on November 17, 2010 in Washing D.C. at the National Forum on Clinical Integration.

November 15-17, 2010  |  Washington, DC American Conference Institute's  National Forum on Clinical Integration The Authoritative Guide to ACOs and other Integrated Models in the Wake of Health Care Reform.

Experts estimate that a majority of the newly formed ACOs ultimately will reach their demise within the next three years due to lack of sound financial structuring, failure to obtain physician buy-in, and overwhelming contradictory legal regulations that Congress and the Obama Administration have yet to address. While academics continue to debate theories and we wait for regulatory guidance, key hospital and physician decision makers are reserving their places at the premiere National Forum on Clinical Integration to get answers now and stay on the road to success.  Overcome financial, practical, and legal obstacles with the go-to experts that leading hospital systems will turn to first. Only here will you benefit from one on one meaningful networking opportunities and walk away with the answers to tough questions critical to financial and legal sustainability.         Gain in-depth answers for: Tailoring the integration based on location-specific site variations and technical capabilities Learning directly from the FTC's Assistant Director for the Health Care Division in the Bureau of Competition on his ACO enforcement priorities, how the agencies are working together to resolve antitrust concerns, and what will raise red flags when it crosses his desk Understanding the practical distinction between ownership interests and membership in the ACO in the eyes of the regulators Developing a flexible template for a Stark analysis to apply exceptions to emerging formations Establishing an evidence-based medicine approach without implicating CMP laws Developing cost-effective and efficient quality and performance metrics Ensuring physician incentives and avoiding limitations for growth opportunities, and much more! View Brochure: Too much is at stake to overlook these practical challenges that can devastate your investment. Click on the brochure and register today for the industries foremost event for hospital executives. www.AmericanConference.com/ACOForum We want your opinion! Take 1 Minute to fill out our 6 question survey on ACO's and find out what your peers think in the process! Click Here...

 

ARE NON PROFIT HOSPITAL TAX EXEMPTIONS RELEVANT OR NEEDED?

    

    The principal justification for the extension of billions of dollars of tax exemptions to non-profit hospitals has been their self proclaimed charitable mission.  While many of these hospitals have in the past struggled mightily to provide health care services to those uninsured in extreme need without resources, others have provided little more charitable care than for profit facilities, content with equating bad debt with charitable mission.   With the expansion of access to health care insurance under the recent health care reform legislation, the PPACA, the question of the utility and relevance of tax exemptions moves into high relief.

HEALTH CARE REFORM BILL (IV) : NEW REQUIREMENTS FOR NOT FOR PROFIT HOSPITALS TO MAINTAIN TAX EXEMPTION.

    As part of the Patient Protection and Affordable Care Act (“PPACA”) not for profit hospitals must satisfy four new requirements to maintain their tax exemptions. They must:

• Conduct a community health needs assessment once every three years.
• Adopt a policy for financial assistance.
• Limit charges for those qualifying for financial assistance  and 
• Refrain from taking extraordinary collection actions before undertaking reasonable efforts to determine whether a patient qualifies for financial assistance.

    

HEALTH CARE REFORM BILL (II): MEDICAL DEVICE TAX - CONTROLLING COSTS OR STIFLING INNOVATION

There were not any easy choices in the Patient Protection and Affordable Care Act  (“PPACA”)as amended by the Health Care and Education Affordability Reconciliation Act (“HCEAR”), except perhaps the opportunity to stick it to the perpetually tanned Rep. John Boehner (R.Ohio), by imposing a 10 percent excise tax on tanning salons using ultraviolet lamps.  The Congress did impose a 2.9 percent excise tax on the sales of medical devices which is expected to raise $2OB in revenues to fund the expanded coverage of health care reform.  (The  original proposal was for $40B.) (See section 9009 of the PPACA and section 1405 of the HCEAR)  In addition new rules on proof of safety first and the implementation of “effective research” requirements are expected to further raise the cost of doing business in  the Medical Device field.

COLORADO FUROR OVER INTERNET SOFTWARE TAX BILL.

 The Colorado legislature has many high technology companies and consumers up in arms over the passage of HB 10-1192, which in effect imposes a sales and use tax on downloaded software in the state of Colorado. This may have some impact on Colorado companies that sell healthcare software over the internet to consumers in Colorado.

The bill taxes downloads of “standardized software,” which the bill defines as “computer software, including prewritten upgrades, that is not designed or developed to the specifications of a specific purchaser: or Computer software designed and developed to the specifications of a specific purchaser but then sold to another purchaser.”

The legislation has been met with load outcries of alarm from the Colorado technology community and those actively engaged in economic development in the state. The original bill has been modified with an expansive legislative declaration that the bill is 'not intended to alter, other than the designation of standardized software as tangible personal property, the tax treatment of what is known in the industry as "digital goods", "application service providers", software as a service" or "cloud computing"'.   

This bill was designed to reach the "Turbo Tax" crowd.  The idea is to eliminate the perceived inequality in tax application when software is sold in shops from where it is sold over the internet and downloaded.  It is one of a series of bills where the legislature is reaching to tax on line product sales.  Although the bill is self described as the repeal of an "exemption" in truth there was no "exemption."  There was no tax in the past because the tax is on "tangible personal property" and software is an intangible, except when it sold on DVD. The legislative solution is to change the definition of "tangible" to include what is "intangible."  Just redefine "white" as "black." Problem solved.  "Down" is the new "up."  Is this a wonderful country or what?  This may be an example of that wonderful definition of statutory law as “common sense as amended by the legislature.

“GENDER REASSIGNMENT THERAPY” CAN BE TAX DEDUCTIBLE --TAX COURT.

63 year old Rhiannon O’Donnabhain, formerly known as Robert O’Donnell, divorced father of three, former sailor, construction worker and engineer, has prevailed in tax court on her claim for the deductibility of $25,000.00 in out of pocket expenses for therapy and surgery related to converting her sex from male to female. The issue is whether 26 U.S.C. Section 213 of the federal tax code permits the deduction of sex change expenses as treatment for a “disease” or whether it was non-deductible as “cosmetic surgery.”