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AHLA's Speaking of Health Law
Protecting the Tax Exemption Privilege: Guidance on Taxes, Audits, and More for Nonprofit Hospitals
Michael Kuczynski, Counsel, Polsinelli PC, speaks with Vince Tennerelli, Associate General Counsel, Community Health System, about how in-house counsel can navigate the world of taxes and audits for their nonprofit hospitals, with a focus on the Form 990 and Schedules H and L. They discuss how the Form 990 and corporate governance come together, conflict of interest policies and procedures, and community benefit tracking and calculating. Vince recently co-authored an article for Health Law Connections magazine about this topic. From AHLA’s Tax and Finance Practice Group.
Watch this episode: https://www.youtube.com/watch?v=iYB4myHb1xw
Read Vince’s Health Law Connections article: https://www.americanhealthlaw.org/content-library/connections-magazine/article/836c8a08-b55f-417b-8638-c7120d82b404/Protecting-the-Tax-Exemption-Privilege-Guidance-on
Learn more about AHLA’s Tax and Finance Practice Group: https://www.americanhealthlaw.org/practice-groups/practice-groups/tax-and-finance
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SPEAKER_01:Good afternoon, everybody. My name is Michael Kacinski. I'm a vice chair with AHLA's Tax and Finance Practice Group and a counsel with Pozzanelli Law Firm's Non-For-Profit Organizations Group. Today we're going to be talking with Vince Tenarelli, who I'll let introduce himself in just a minute, on his really wonderful article, Protecting the Tax Exemption Privilege, Guidance on Taxes, Audits, and More for not-for-profit hospitals, which was recently published in Health Law Connections. I had a great time reading this article and really spoke to me given my backgrounds, having worked at EY, practiced in-house as an executive director of tax at a large not-for-profit health system, and now practicing in private practice at a law firm. So with that said, I'll let Vince introduce himself.
SPEAKER_02:Hi, I'm Vince Tenarelli. I'm associate general counsel at community health system in Fresno, California. Before coming to community, I was uh an assistant U.S. attorney in the Eastern District of California for about seven years. Started in the civil division, um doing false claims act work and then moved to the criminal division where I was uh doing more white-collar uh work. And since moving to the to the health system, I focus on um physician contracting, uh regulatory compliance, and I was sort of the person designated to um dive into our 990s, uh, which was my really my last my first foray into tax since taking it in law school in uh in 2008. So yeah.
SPEAKER_01:Wonderful. Thank you for that background, Vince. Um, you know, it's a really appropriately, appropriately timed article. Um, as we spoke about last week when we were just going through the article, um, you know, the 990, it's a publicly available document. And that means that watchdog groups, the local uh newspapers, the IRS, state agencies, um, activist groups, they're all looking at this document. And the parts of it that you focused on in your article are Schedule H and Schedule L, which of course are two of the more high-profile and I would say high-risk sections. So my first question to you is having not touched tax since 2008, how did it land on your desk?
SPEAKER_02:Um I think because somebody had to be had to be assigned to it. And uh, and I was the the new guy in town. And I think we wanted to have a little more legal involvement in our um in our 990 filings. Uh, I know that, you know, with a lot of a lot of health systems, this was really a function that has been delegated to, you know, assigned to finance for a long time and to the outside auditors. Um, but we wanted to make sure that that we were very comfortable with the material in it. And so I was sort of assigned to this this project and dove into the instructions and you know, kind of went from there.
SPEAKER_01:Yeah, and you know, I I think getting legal involved in the 990 and the disclosures and especially the sections that you've highlighted, it's really smart. Um, and you know, I think it's something that I've always struggled with a little bit, especially when I was in-house, is what's that balancing act? Um, I'm curious, in your experiences now, have there been any practices or takeaways that you have found that were really successful or you know, instances that you could point to that were real value ads and getting everyone aligned and on the same page? Sure.
SPEAKER_02:Well, I think that one thing that where the 990s and corporate government governance really come together are with respect to the need to understand the corporate relationships for for your board of directors, for your officers, um, because the 990s require you to disclose a lot about that, uh, any transactions with those folks on Schedule L. Um, and so I think that it gave us an opportunity to kind of hone our processes for identifying um directors or trustees, business relationships, you know, even business relationships with each other, uh, which is which is a specific item on the on the 990s. Uh, you know, that involves like asking the right questions on your conflict of interest disclosures. You know, I'll just just to give an example, you know, the conflict, a lot of conflict of interest disclosures will will say something broad like, you know, do you have an ownership interest in a company that does business with XYZ health system? And if somebody answers yes, unfortunately that doesn't give you enough information to know whether to report it, because the schedule L is is written that if it's an ownership interest of 30%, I believe, or more. And so if you actually have to get down in the weeds enough to know what the percent of the ownership interest is, um, because if you don't have that information, you just don't have enough to answer the question. And so I think you can really kind of hone the way you're asking the questions and sort of the instructions you're giving to the to trustees uh to make sure that everything it to make sure you get the right answers up front so you don't have to ask clarifying questions after.
SPEAKER_01:Yeah, and then you also have the thresholds of income. And you know, looking back to when I was in-house, I know it was something that I always struggled with because these board members are giving their time, right? And oftentimes, especially at parent entities of large not-for-profit health systems, they are very busy people with you know very high-level jobs. And at the same time, you're asking these very important questions. And 15 years into my career, I am still going through the Schedule L instructions when questions come up. They're very confusing, they are very nuanced. And all this is to say, to get answered correctly and to avoid a garbage in, garbage out situation, there's certainly an element of education that has to come with it. Um again, keeping in mind that you don't want to take more time than is absolutely necessary of people who are generously giving it to your system and others.
SPEAKER_02:Sure. Absolutely. I think that's I think that's really important. But I think more investment of time and resources up front will save you time on on the back end um and obviously ensure accuracy. Um, because calling people after the fact and asking for clarification, you know, it just it just gets to uh it just becomes uh a lot more difficult process. And and also another thing um that I think is important is another reason that you want to have all this information up front is because when the board considers certain actions or when the board is is potentially taking up a particular item of business, you need to know about all potential conflicts of interest up front because the IRS provides a means of, or well, I guess uh particularly in California, you know, state law provides a means for kind of insulating your transactions from any allegations of improper dealing or anything like that. But there's kind of a process that you have to work through to meet those requirements. And one of the elements there is, you know, things like that the, you know, the board member that might have a conflict doesn't participate in the vote, you know, but also that the board is aware of the conflict, that the board um has considered alternative proposals, things like that. And so if you don't know about the conflict, you may not know to check those boxes. And it's difficult to go back and fix a transaction um, you know, after the fact when you haven't gone through that process.
SPEAKER_01:Yeah, and you know, as we were talking about last week, um, there's a lot of physicians that are married to other physicians. Perhaps they are uh independent contractors or own a piece of a physician practice, or their spouse does. So there's a lot of nuanced situations aside from just the board member owns a business that is doing business with uh with the system or a related entity to it. Um and to your point, I I completely agree. Being proactive is a lot easier than having to unwind and correct whatever went wrong, especially when it could be something as simple as uh board members recusing themselves, having that documented in the minutes, um, and having that documented, especially if it's a very large, important agreement or contract that has to be approved by the board, um having that documented there as well can certainly serve a lot of headache if the system ever gets audited, just being able to hand over those minutes and show what proactive steps that were consistent with the conflict of interest policy and consistent with the IRS's rules.
SPEAKER_02:Yeah, and I and I would say the other thing I would kind of say is, you know, conflicts of interest are, I think, inevitable. And I don't think it's practical to, you know, set up a board that where, you know, or even advisable to set up a board where they're so separated from the community and so separated from the, you know, the health system that that they're not gonna, you know, that you're not gonna have at least some situations where you need to, you know, just uh take these steps to to you know protect, you know, protect the integrity of the of the you know voting process because the IRS wants you to have a community board. I mean, they want you to have a board that's made up of at least uh some members of the community, um, but they also want to, you know, control conflicts of interest. I mean, the reality is that if you have a true community board, you're probably gonna have some leaders in the community, and those leaders are gonna have um business interests and they're gonna have other things they're involved with. And so you just need to know everything up front so that you can navigate the process um, you know, as you go.
SPEAKER_01:Yeah, and you know, what always gave me a little bit of pause, particularly when I was in-house and in charge of the process, is where are my blind spots, right? So as health systems, health systems have gotten more complicated, whether it's with joint ventures, whether it's with compensation structures that are equity or carried interest-based, um, or something as simple as these are oftentimes large boards, or there are turnover, uh, there's turnover at the officer ranks. And for you know, for former officers or directors or key employees, how do we continue to monitor and be aware of those dealings with the former folks that are no longer filling out the questionnaires or are no longer going through whatever processes your system has in place to keep track of these conflicts of interests?
SPEAKER_02:Yeah, I think with the formers it can be particularly challenging. I think for the most part, if I remember from um from Schedule L and part seven, with the formers, it's typically going to be direct compensation to them a lot of times that that's gonna then trigger them being on part seven, which will then trigger them being on schedule L. Um, and so it's a little bit easier to identify those transactions. Um, I think where, you know, and we'll probably talk about this a little bit more, but I think where with formers in particular it can be particularly fraught is if you don't have strong FMV support for for your um for your transactions, um, which can give rise to potentially like an uh accusation of an excess benefit transaction, um, in in which case the the the scope of the folks that that can be um the the scope of the individuals um that that can be kind of brought in on that as opposed to schedule L is a lot is a lot broader. Um so you know we'll we'll we'll I think we'll probably talk more about excess benefit a little later, but yeah.
SPEAKER_01:Yeah, and you know it's a fair point, especially when that's something that's so integral to creating the remotable presumption that what the system was doing uh was done correctly and was validated on the front end. Um when we spoke last week, something else that you said that I really liked was uh sometimes you just don't know, right? Like what may wind up being a bad deal on the back end, um, that's kind of your insurance policy in some ways to show why this was made with you know reasonable and prudent business uh mind going into it and how all of this was established, how you looked at multiple vendors, and how you established the fair market valuation in terms and the negotiation at arm's length and the approvals and so and who was involved in your system and so on and so forth. So, you know, I think it's a a wide-ranging um exposure point. And you know, as systems have grown more and more, um it's something that's more and more challenging to keep track of. When you know you are running a community hospital, to your point, and people know one another in the community, it's a lot easier to keep track of who owns what business and and things along those lines now where you have you know systems operating in multiple states, and you know, although the last year has been a little quieter, but have been acquisitive over the last decade plus, um, systems are a large a lot larger and more complex and integrated than they used to be.
SPEAKER_02:Yeah, I mean, I think like, you know, maybe a traditional arrangement. I mean, it's easy to see how you get an FMV and it and determine FMV for something like, okay, a real estate transaction, you get an appraisal and then you've got the appraisal, you know. But I think now health systems are doing a lot more sort of risk-based um arrangements where it might be some sort of capitation where there's a subcapitation thing or something. And with risk comes, you know, the chance for making more money, but also losing more money. And I think that um having documentation up front to establish why this deal made sense at the time, and you know, hopefully an outside evaluator that agreed uh that the deal made sense at the time will provide a lot of the cover, I think, that you need, regardless of what happens down the line.
SPEAKER_01:Yeah. Um shifting focus a bit. So we've been talking about Schedule L. Let's move over to Schedule H for a bit. So Schedule H, the section that entities with hospital licenses have to fill out, they have to be compliant with 501R if they have one. And you know, as hard as it is at times to align legal and finance, now you're talking about a function that is certainly at the forefront of Congress and you know, different organizations that do studies on how much charitable care an organization is giving out and analyzing that versus tax breaks. But you're also now involving, you know, perhaps it's marketing, perhaps there's a community benefit department. Um perhaps you're operating in multiple states that have their own unique sets of restrictions and rules. Um perhaps it's a new entity that just joined, and the folks that joined are used to doing things their way. Um so all this is to say schedule H is a tough one. Yeah, especially with the community community benefit reporting.
SPEAKER_02:Yeah, and I think it's important for folks to understand the context for Schedule H um and where where it comes from. You know, that that Schedule H I think comes from, I think 501R was added as part of the Affordable Care Act, or at least it was amended as part of the Affordable Care Act. And uh, you know, I think what's what's um underpinning 501R is just the fact that people view nonprofit health systems and hospitals kind of differently than they view other nonprofit entities. There is more scrutiny because, you know, unlike um, you know, a a charity or or another, you know, another organization that is mainly, you know, that is doing this this sort of traditional philanthropic work, you know, a hospital is operating a business and it's doing a lot of um activities that more resemble sort of a for-profit business um than some other nonprofits are doing. And so, you know, 501R and Schedule H are really kind of forcing hospitals to provide a lot more backup and detail to support, I think, their exemption. Um, and and and so there's a lot of information, um, like you said, with respect to community benefit reporting, um, charity care, financial assistance, um, things like that, that the that that health systems, you know, have to have to provide. There's a lot of, I think a lot of health systems are including a lot of narrative in their Schedule H. I think that's probably advisable. Um, and luckily, you probably with your community um benefit report or with your um with you know sort of the mandatory reports that you have to generate on a regular basis to sort of support your you know, your community health needs assessment, things like that, you know, you should have a lot of the documentation already available uh to kind of fill that in. Um, but but it's definitely worth a lot of attention.
SPEAKER_01:Yeah, absolutely. I mean, I you know, it's oftentimes one of the first sections that newspapers or whomever it is will flip to as new 990s come out. And, you know, there's there's the IRS saying it's going to audit um hospital entities once every three years. That doesn't mean that it's necessarily going to be a full-blown audit. They may just do a bench audit or they may look at it behind the scenes and close it without doing anything. Um, but you also have a lot of states that are auditing it or tying benefits to it. Um Oregon, I believe, has their property tax exemption now in some way tied to community benefits. And, you know, equally surprising. You don't often see Oregon and Florida doing the same thing. Florida uh it it tr it went up for vote a couple years ago. It didn't make it through the legislative session, but it was talked about. Um, so I think that really goes to show just the widespread importance. And of course, other states have their own sets of either reporting or contingencies. Um and then, of course, you go to the watchdog groups, right? And they are laser focused on these numbers. They are looking at the estimated value of tax breaks, which, you know, I in my personal experience, I feel like that's always been, I don't want to go so far as to say a fool's errand to figure out the exact amount of tax breaks that health systems are getting, but it's it's challenging at a minimum. So I always look at those studies with a little bit of a skeptical eye. Um, but all this is to say it's really important for health systems to have good procedures in place, to train their folks, and to make sure that all of these numbers are being captured and reflected accurately. So I'm curious, as you've gotten involved, what your thoughts are on the process and you know what's been some of those more eye-opening um, you know, procedures and just challenges that have come with it.
SPEAKER_02:Yeah, I think I think with respect to community benefit reporting, um, particularly the narrative aspect of it, um, the big there's a much bigger risk, I think, in terms of the narrative of under-reporting. Um, because I think there are a lot of in-kind community benefits that are being provided by health systems that folks, um, the different departments, you know, health fairs and things like that, that departments just may not even be thinking about, you know, and that may not be necessarily showing up on the ledger. And this is one of the reasons why, you know, it's important for legal and other departments, not just finance to be involved in in the 990 process. You know, there could be a lot of um a lot of, quite frankly, like a lot of good being done in the community that um by different departments that may not be like a big system-wide initiative uh that you want to make sure uh you know gets gets gets captured there because um otherwise you're really shortchanging yourself because you're not you're not really making the strongest case that you could for exemption, for the continued exemption of your health system, and and that you're meeting, um, you know, that you're that you're meeting the standards for exemption. So I think that, you know, what you what's really important is to make sure that you or make sure that finance is um you know has a process whereby they are soliciting input from from different departments to identify the the various charitable activities that they are undertaking. Um and and that that they understand, you know, what that what it means for for something to really you know be it be a charitable activity. Uh, because there could be a lot of things that they're just not thinking of or not considering that that could fall under that. And so um, but you know, there there are there are also uh in my experience, there are quite a few gray areas in terms of what different systems report. Um you know, things like, you know, we talked a little bit about, you know, things like um a health system sort of contributions to to its medical foundation and things like that. Well, um, you know, do you include, you know, do you include that in community in community benefit reporting? Um, do you not? I I think I don't think there's uniformity there. So that that's a place where, you know, in-house counsel and even potentially um for something important enough outside counsel may want to have a firm opinion on that um so that you at least have support down the line for why you took whatever position you did.
SPEAKER_01:I completely agree. I mean, the the saying that comes to mind for me has always been it's more art than science. Um you could give the same set of data to different departments or different hospitals in the same system, and probably get, you know, for each one of those, a different result of what winds up getting reported on Schedule H. Um and that's kind of part of the way it's written, right? Is just what gets included, what doesn't. And, you know, we mentioned before acquisitive systems. And, you know, I think that there's certainly an education element as you onboard a new hospital, as you onboard a new system into your parent entity, and you know, what was done before is not what's done now. Um and similarly, this extends out on Schedule H reporting, right? As far as are your revenue cycle or your accounts receivable folks that come over or join your system as new employees. How are you training them to make sure that they know your um your financial assistance policies, what your uh financial assistance thresholds are for charitable care, um, what your um excessive collection actions are, or rather what they what you do not do as a system. Um it's an ongoing process. So it's it's a challenge though. I mean, it's a big undertaking for systems. I'm sure it is for yours every year.
SPEAKER_02:Yeah, I uh absolutely. I think that you know, hopefully when it comes to financial assistance, your system, you know, the system will have uh a policy in place uh that kind of gives you gives you what you need on that. And hopefully they're following it to you know to the letter because that that kind of really simplifies that process. I think that you know it can provide a good opportunity for some of these things where you where you need to identify like financial assistance or charity care, whether your system has policy. It gives you a good opportunity, you or compliance, to just make sure that um the policy is in place, it's up to date and being followed, um, and it accurately reflects the the actual practices of the organization. So this is one of those situations where you know it's not just going through this process doesn't just give you the opportunity to make sure the 990 is accurate, but also maybe to fix some um fix some uh tweak some things within the system um that that could be improved on.
SPEAKER_01:Yeah, and you know, depending on what state the system is located in, there might be state requirements that are more stringent than federal requirements. So, as important as it is to remain up to date and current with um with the IRS, there are states that may have more stringent requirements, whether it's collections actions or what can be counted or how things are counted for charitable care. Um and you know, something that came to my mind as I was going through this process all the time is in an ideal world, and it's hard to do this, right, because everyone's really busy at their jobs and their systems, is you know, making it a more frequent than a once-a-year conversation. So whether it's getting all the different stakeholders together on a quarterly basis, right? So maybe it's finance, legal, marketing, whoever it has a role to play in your community benefits process, getting those people just to talk and figure out what are we counting, what should, what shouldn't we count, and trying to get that uniformity across the system. And Vince, as you said, I mean, ultimately, I think the best defense, and whether it's this stuff or you know, macro nonprofit issues, the most important thing to me, I think, in today's day and age is having um policies that are compliant with the law, that are reviewed frequently, and to make sure that everyone's rowing in the same direction, whether it is your uh officers and leadership, whether it's you know, accounts payroll, revenue cycle, accounts receivable, board members, legal finance. Um, you know, I think that maybe quarterly is overkill, but certainly more than once a year, I think would would probably help to drive better results if it's at all possible.
SPEAKER_02:I think that's right. I think that's right, making sure that everybody is sort of sort of on the same page. I mean, I think for a system like mine that has an extremely high Medi-Cal uh patient population, you know, um, I think that the Medical short, the the Medicaid uh being, you know, Medi-Cal being California Medicaid, you know, that that Medi-Cal shortfall will drive a lot of the a lot of the the community um, you know, a lot of the numbers um because we just have a very large Medi-Cal shortfall. Um But particularly for a system that might not have that, that might have a larger uh, you know, commercial payer base, you know, I think it's just all the more important to make sure that you're supporting your exemption as much as you possibly can by capturing every single thing that ever every single thing that your system that your system is doing.
SPEAKER_01:I I I agree. And you know, I think um especially in today's age where people, you know, just take easy-to-digest statistics, it's very easy to cherry-pick numbers and drive a narrative and drive a story with those numbers. Um before we got on the call, I was uh I was scrolling LinkedIn and I saw someone post something about the five largest health systems, and um they were quoting gross revenue numbers with a line that said not-for-profit question mark. And first of all, it's crazy to take a gross number because you know, as I'm sure many people listening to this call are aware, hospitals operate on very small margins. So that's number one. And, you know, on a personal level, number two is I under, you know, understanding that nonprofit is the type of a corporation at the state level, I don't love that term. I think tax exempt is much better. And the reason why is whether you are for-profit or nonprofit, at a certain point, if your expenses are greater than your revenues coming in the door, at some point you're going to go out of business. So it sounds great that not-for-profit hospitals should in fact not make a profit, but that's just not an economic reality. If we want to have hospitals in our communities that have up-to-date equipment and qualified physicians and nurses and staffs taking care of their people and so on and so forth.
SPEAKER_02:Absolutely. I think that's I think that's absolutely right. And I will note that um, you know, another besides the the gross revenue, you know, I think another area where, you know, you're likely to see a lot of scrutiny, um, whether it's deserved or not, is in with respect to, you know, there's a lot of compensation information um in in these in these 990s. I think that the, you know, particularly with executives, and that that just that just reflects, I think, the challenge of the fact that a nonprofit still has to keep keep the lights on. And, you know, that means attracting and keeping talent when uh that talent might have other options and everything like that. And so um, but that that is something that I think is very easy for the media to see. They can just the page is it's one page where where everybody's salaries are kind of set forth. Um and so they're gonna focus on that. But if you have a really, I think the the schedule, um, schedule H, if you've really supported all the good that you're doing for the community and all the you know, charitable activities that you're doing and your charity care and everything, you know, I think that's one of the rebuttals that that you'll that you'll utilize is that yes, we have some people making a good amount of money, but we also um, but um we are we we are also um you know definitely um serving a a very strong net positive in the community, um, notwithstanding that, you know.
SPEAKER_01:I completely agree. I mean, there are a few things that could get a a letter co-signed by senators Warren and Grassley, but apparently not-for-profit health care compensation is one of them. And you know, I think what it ultimately boils down to, in my view, is there's a PR risk. And, you know, when you strip all this back and you take a look at it, the majority of health systems, their single most valuable asset is that piece of paper that says you are a not-for-profit tax exact corporation, right? You're you're hospital, you could bring in contributions, and you only have to pay tax on unrelated business income. And you know, I think what always scared me is you have, as we've been talking about, schedule H, Schedule J, Schedule L, uh, the 990T with UBI. And, you know, going back to these sort of uh watchdog groups or whatever it may be, what always gave me pause is that PR risk. And it, especially in the day of social media, is so fast and so swift that that first story comes out and no one even cares about what the rebuttal is to it, right? And and by then you're already in too deep. And look, a lot of the people who are reading that and who may, they're gonna come in with their own conclusions anyways, or want the story told in a certain way. But I think what we're talking about today are with schedule age, it's how do we build up all these wonderful facts? I used to have a boss when I was at EY, and she said, you know, the 990 is where you brag on all the good you do. And um, and I think that's right. But then with Schedule L and especially with your conflict of interest policies and procedures, how do you guardrail the organization from being exposed in that negative light?
SPEAKER_02:Yeah, I think that's right. I think with with Schedule L in particular, you know, it's not the it's it's not the end of the world. And in fact, I think it's pretty understandable that you'll have some transactions, hopefully not excess benefit, but but just some general transactions that you'll you'll need to um report on on Schedule L. You know, I think it's um um I think when it comes to Schedule L, it's maybe maybe similar to like um not uh maybe it's like similar to like not not reporting a a you know an underage drinking ticket you got when you were 16 on your on your moral character application or something on the bar where it's like you you're not if you disclose it, nobody's gonna care. I mean, you know, if you disclose it, it's not gonna be a big deal. But then people love to, if you if you accidentally leave something off and then it comes up later, you know, I think that's where you're gonna you're gonna you know face a lot more questions, you know.
SPEAKER_01:Yeah, no, I I I completely agree. And um, you know, I I think all this goes back to our first point is these are the reasons why it's so important to get alignment between legal and finance, and now more than ever, to make sure that your board is reviewing its well, it's always has access to the 990s, but ensure that the board is giving good thoughts and their viewpoint and making sure that they're really understanding that when we put these questions out there to see if you've had any business dealings, it's not to be annoying, it's because we need to lower risk and we need to mitigate risk in what we're doing, um, and ensuring that we are giving an accurate, complete return that either watchdog groups or the IRS cannot then come back and say, well, this was materially wrong or incomplete, and then you have a much bigger problem on your hands.
SPEAKER_02:Right. Because I think it, you know, at best it it'll raise questions about your processes, and at worst, you know, it it'll it'll end, you know, someone will think that you were actually trying to hide something. So, you know, I think just uh err on the side of of over over inclusion sometimes. I mean, if if it's if it's gray, you know, I would say to err on the side of inclusion um and and make sure you're just gathering as much information as as as you can so that you you make sure your you know your disclosures are are accurate. You know, one thing, one thing that that I've seen too is like, you know, physicians some sometimes, you know, whenever you know you ask them for their for their businesses or you know, what businesses do they have an interest in. Well, this is one of these things where the information on the ledger um can can lead to to things being difficult to spot because a lot of physicians have a sole proprietorship or they have like a personal corporation or whatever that that they you know that that the payment that their payments go through. Well, you know, that's that's something. And when you ask them if they have, you know, interest in a business, they're thinking, they're not thinking that's a business. They're just thinking like that's my professional corporation. Well, then, you know, when finance is looking at the ledger, they're seeing payments to this corporation, you know. Um, but you know, maybe they're not, you know, maybe then they're they're not capturing that for something like Schedule L or part seven, you know, and so you know, I think that's one of the another instance in which, you know, you just want to make sure that the trustees are kind of aware of exactly here are some situations that that might come up and so that they understand exactly what's being asked.
SPEAKER_01:Yeah. No, I I I think that's a great point. And um you know, as we were just highlighting, all of this is to say it's a risk mitigation exercise. And um, you know, I think health systems, you know, you kind of touched on this before. Um especially at the executive levels, a lot of people and you know, could could go to work for a for-profit company and and make a lot more. And I I in my experience and in my career, I have felt as if most people are drawn to this field because they want to be at a at a company that's doing very important and in fact critical work in their communities, even if it's not captured on Schedule H, um, you know, a lot of the good is being done by these hospitals. And um, you know, I think uh I think it tends to attract that kind of person.
SPEAKER_02:Yeah, I agree. I agree completely. Um and um yeah, but it's just a it's just a different different thing when everyone's you know everyone's salaries are kind of put up there and you know not only not only just the not only just the C suite, but you know um a lot of times a lot of sort of leadership uh leadership positions and um you know other other other positions that that may not be at the very top um and and a lot of you know when it when you're talking about like you have to you know report you know highest compensated employees and things like that um you know if you have you know a physician um that's serving in an administrative role you know obviously you can't employ physicians in California for clinical work but you can you know but but they they can be employed for you know for serving you know in in a in an administrative role at a hospital again these are folks that are gonna have a lot of opportunities to make more money you know um and and you know so but but still I think when folks look at those portions of the of the 990s they just see numbers you know and and they're not necessarily underst understanding the whole you know the whole landscape of of the healthcare market but it's just something that that health systems have to have to anticipate.
SPEAKER_01:Yep it's part of the process of running the business I suppose but um but again I you know I thought this conversation it flew by uh appreciated your article uh for those again uh listening in it's the protecting the tax exemption privilege guidance on taxes audits and more for nonprofit hospitals and Vince wrote co-wrote it with Nick Kump from uh King and Spaulding it's really a a quick read and easy read but a really good read. I mean I it's um something that I think a lot of people would find value in and certainly will spark a lot of conversations at systems about how can we get just do that a little bit better, not do the same as last year and just every year you know bring in the right people to fine-tune those 990 disclosures more and more and just make them useful and and most importantly make them where they're putting a a a true and accurate picture of all the good that your hospitals are doing in their communities because they should be acknowledged for it.
SPEAKER_00:Yeah I agree I agree well thanks very much this was uh this was fun I appreciate your time no thank you and hopefully we have the chance to do one of these again sometime soon I agree agree thank you Michael if you enjoyed this episode be sure to subscribe to AHLA's Speaking of Health Law wherever you get your podcasts for more information about AHLA and the educational resources available to the health law community visit americanhealthlaw.org and stay updated on breaking healthcare industry news from the major media outlets with AHLA's Health Law Daily Podcast exclusively for AHLA comprehensive members. To subscribe and add this private podcast feed to your podcast app, go to americanhealthlaw.org slash daily podcast