Watchdog; Bill mandating more reporting from tax-exempt hospitals ‘common sense’

By Thérèse Boudreaux
The Center Square

Thousands of hospitals subsidized by American taxpayers could face heightened fiscal scrutiny under new legislation heading to the U.S. House floor.

Currently, nonprofit hospitals must provide certain community benefits and charity care and disclose those to the IRS in order to maintain their tax-exempt status.

But reports allege that at least over a dozen major U.S. hospital systems abuse their tax-exempt status, with some currently providing minimal community benefits and hiking healthcare prices even as hospital leadership receive lavish salaries.

In an effort to help combat that, the Tax Exempt Hospital Transparency Act would expand reporting requirements for all nonprofit hospitals.

Vikas Saini, president of the Lown Institute, a nonpartisan healthcare system watchdog, called the bill “common sense, and long overdue.”

“There have been a lot of shortcomings in what we know about nonprofit hospitals and their behavior, and there have been a number of issues that have surfaced over the past several years,” Saini told The Center Square. “So there is a clear need for a lot more, and this bill is a major step forward in making these issues more transparent.”

Nonprofit hospitals make up about 58% of community hospitals across the U.S. as of 2026, according to the American Hospital Association.

Under the legislation, all 2,984 nonprofit hospitals must report the value of any financial assistance provided and the number of financial assistance applications received, granted, and denied during a taxable year. Hospital systems must also provide the CMS verification number for each facility.

“I don’t think there are any real onerous provisions that require major implementation changes or commitments of dollars. But it does require disclosure in a lot more detail,” Saini noted.

“This bill helps fix some blind spots, one of which, for example, is reporting at the facility level. These big systems that merge and combine 10, 20, 50 hospitals, their reporting now makes it very hard for anyone to really understand what their behavior is. And quite often, it ends up hiding poor-performing hospitals,” he added. “So I think this kind of transparency is welcome.”

For large nonprofit hospitals – those with more than 100 inpatient beds – the bill also requires reporting on how much they spent to address the top three priority health needs of their communities, as well as money spent on nonclinical programming and quality improvement.

Nonprofit hospitals that generate more than $100 million annually in net patient revenue must additionally disclose how much they spend on advertisements.

Notably, the bill imposes some of the first real transparency measures for nonprofit hospitals using the 340B drug pricing program.

High-revenue tax-exempt hospitals would have to report how many patients received outpatient drugs covered by the 340B discount, how much it cost the hospital to comply with 340B program requirements, and how much net revenue the hospital accrued from the 340B program.

The extra reporting requirements aim to uncover hospitals that take advantage of the 340B program by acquiring covered drugs at a discounted price but then charging low-income patients the regular price and pocketing the savings.

“That program was meant to help the poor and those who have poor access to medication. But the problem has been, once the bill was implemented, there’s really no sense of whether that’s actually happening the way it was intended,” Saini said.

“And if it’s all being spent in ways as the original legislation intended, great, no problem. But to the extent they’re using this almost as a windfall to sort of buttress other aspects of their operation, then I think the public deserves to know that.”

Several states have already implemented provisions even stronger than those in the Tax Exempt Hospital Transparency Act, such as imposing minimum spending levels on charity care and community benefits, and “the sky hasn’t fallen,” Saini noted.

“I think all nonprofit hospitals who are trying to do right by their community shouldn’t have a problem with it,” Saini said. “I think it is something that illustrates how they behave in the community, and I suspect that these issues have been festering for so long that there’s going to be strong bipartisan consensus around this…it doesn’t have any particularly onerous requirements beyond disclosure and transparency.”

House Ways and Means Committee Democrats, however, all voted against advancing the bill, echoing claims from the American Hospital Association that the additional reporting requirements would be too burdensome.

Committee Ranking Member Richard Neal, D-Mass., said the bill “piles on duplicative reporting requirements with no clear benefit.”

“I hear from my hospitals weekly about the strain they are under. The last thing they need is another unfunded reporting mandate,” Neal stated during the Wednesday bill markup.

As of 2024, the U.S. hospital sector was a $1.6 trillion industry, according to the most recent CMS data.