MHA's Friday Update Messages

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A Threat to Hospitals’ Charitable Purpose

November 10, 2017 By: Your MHA Team

With the public release last week of a federal tax reform package, and its passage Thursday by the House Ways and Means Committee, Maryland’s hospitals face the possibility of losing an important means of raising money for critical infrastructure projects that support their mission of care.

Embedded in the tax proposal is a provision that would eliminate the tax-exemption for private-activity bonds, including 501 (c)(3) hospital bonds. For Maryland’s hospitals, all of which are not-for-profit, these bonds represent a significant revenue stream. In the past fiscal year, hospitals floated nearly $2 billion in tax-exempt bonds to support their work.

The tax-exemption enables hospitals to realize lower borrowing costs because investors are willing to accept a lower rate of return in exchange for tax-exempt interest. This furthers the charitable purposes of hospitals in providing care to all in need, including those who receive health care benefits under a federal or state sponsored health plan and those who are unable to pay for the cost of their health care.

Losing the exemption would place vital hospital services at risk, but the greater threat is the long-term fiscal stability of hospitals, whose overall impact on the financial well-being of their communities is far greater than any single infrastructure project.

MHA will share information about the potential impact on Maryland with our state congressional delegation; the American Hospital Association has sent a letter to Kevin Brady, Chairman of the House Ways and Means Committee, and is encouraging hospital leaders to contact their congressional representatives and urge them to oppose this provision.

You know how challenging it can be to manage a hospital in the most stable environments, and today’s political climate, with fast-moving and evolving legislation and regulation, makes doing so all the more difficult. That’s why vigilance and action against threats like these are so essential: so that the care you provide for your patients and communities will not wane.