Tax insight

Ways and Means hearing calls for more not-for-profit hospital transparency and scrutiny around spending

Insight
5 minute read
September 24, 2025

What happened?

The House Ways and Means Oversight Subcommittee on September 16 held a hearing to examine how not-for-profit (NFP) hospitals that are exempt from federal income tax under Section 501(c)(3) spend funds unrelated to community benefit. The hearing examined whether NFP hospitals are fulfilling their charitable missions in exchange for their tax-exempt status and taxpayer subsidies. Specifically, the hearing focused on witnesses’ testimony of the purported lack of transparency around NFP hospital spending on expenses unrelated to community health benefits.

Why is it relevant?

NFP hospitals are a significant component of the US healthcare system, providing community health benefits, especially in rural areas, and serving as major local employers. These hospitals operate at low or negative margins and serve a disproportionate number of uninsured or underinsured patients. Some witnesses raised concerns about rising healthcare costs, hospital closures (especially rural area hospitals), and shrinking reimbursements that are exacerbating patient access issues.

Action to consider 

NFP hospitals may wish to review their reporting of community benefit activities and expenditures on Form 990, Return of Organization Exempt from Income Tax, Schedule H, Hospitals, to assess whether the full range and scope of benefits provided to their communities are clearly reflected.

NFP hospitals also should be aware that the IRS continues to review their compliance with Section 501(r) every three years. These hospitals should consider conducting internal reviews to assess continuing compliance with Section 501(r), particularly those items that are required to be made publicly available on the hospitals’ websites.