Tip Sheets

IRS 990 Forms: Story ideas, past stories and expert sources

April 2018
By Karl Stark, Business News Editor, Philadelphia Inquirer, 215-854-5363

Navigating this tip sheet:

About nonprofit hospitals and 990 forms

  • Nonprofit does not mean no profits; it traditionally means no income or land taxes.(They also issue tax-exempt bonds so lenders pay no income taxes. Donors deduct contributions)

  • 990s are nonprofits‘ tax returns. Hospitals issue them annually to justify tax-free status.

  • 990s are useful for salaries, leads, conflicts, & board members, not finances.

  • The 990 was revamped in 2010. The Schedule H documents community benefits, for-profit joint ventures with executives & doctors, & CEO/top officers compensation. More disclosure.

  • How to get them: hospitalfinances.org

    Other sources: www.GuideStar.org (IRS delays release)

    From the hospital. By law, hospitals must release them in a timely way. (same day if you show up in person)

    Modern Healthcare Database


  • Drawbacks: Finances are older than most recent financial statements. The 990s may conflict with audited financials. Systems may file one schedule H.

  • 990 KEY PARTS:
    Line A
    : Time covered

    Line 5: total # of employees

    Line 10: investment income.

    Line 12 total revenues *

    Line 18 expenses *

    Line 19 excess/deficit ( profit or loss for the year)

  • Schedule H: shows community benefit, charity care, bad debt & more

  • Schedule J: Part II Highest Compensated Employees

  • Schedule L: Transactions with Interested Persons. Hospitals must reveal family or business relationships between board members, officers and top employees.

Schedule H Highlights

  • Sets the first national criteria for disclosing charity care and community benefits. 1st overhaul since 1979

  • Requires hospitals to report expenses based on costs, not charges, which can be radically inflated (and uncollected).

  • In 2009, the new schedule H became mandatory. But many started early.

  • In 2017, IRS let systems report as one entity

  • IRS excludes bad-debt reporting and Medicare revenue (reimbursement shortfalls) from community benefit calculation.

  • Describes management companies and joint ventures

Schedule J Highlights

  • Indicates if anyone got first-class charter travel, travel for companions, housing allowance, residence for personal use, health or social club dues, discretionary spending accounts.

  • Lists others: Severance or change in control payments; retirement plan and equity-based pay deals; compensation based on revenues, net earnings.

How much do nonprofit hospitals give in community benefit?

  • Median charity care for 1,800 nonprofits: 1.52% of expenses and 3.02% for uncovered Medicaid costs. Total IRS definition: 4.54% Source: Modern Healthcare survey Dec. 2011 (Note: Am Hosp Ass says it’s 5.7% for both)

  • “I don’t think people understand how little” hospitals spend on free and discounted care – Harvard’s Nancy Kane

  • Teaching hospitals tend to be lower on charity care, and more on research and education. (Mayo 1% charity care)

Provena loses tax free status in Illinois. Will others follow?

  • Provena Covenant Medical Center‘s free care in 2002 was just 0.7% of patient revenue. Ill. Supreme Court said it wasn't enough.

  • Three Chicago-area hospitals lost tax exemption in 8- 2011 before a moratorium was imposed:

  • 2012 Illinois passed law to provide clarity. It lets hospitals use a three-year average of charity care.

  • Jan 2016 Ill. appeals court calls the law unconstitutional.

  • Mar. 2017 Ill. Supreme Court sends Carle case back, declines to rule on merits of tax exemption

Steel City takes on UPMC?

  • Former Pittsburgh mayor Luke Ravenstahl tried to challenge UPMC’s tax status.

  • UPMC will be tested on charity care & executive pay.

  • UPMC paid $15 million to eight executives (including

    • $5.5 million to the president/CEO), reported income of

    • $277 million on revenues of $6.6 billion for a profit margin of 4.2%, and spent between 1.7% and 3.6% of patient revenues on free care for people unable to pay.

More threats to nonprofit hospitals

  • Conn charges Yale’s 3 hospitals $200m a year

  • A tax judge ruled Morristown (N.J.) Medical Center should not be exempt from property taxes. It agreed in 2016 to pay $15.5 million in back taxes and penalties, plus $1 million a year in property taxes from 2016 to 2025

  • 30 NJ towns filed similar suits. Christie pocket veto’d a Hospital Contribution Fee bill to make all hospitals pay, and put a moratorium on those suits till 2018.

Scrutinize the nonprofit board!

  • Board members’ background. How have they been educated on hospital matters?

  • Do they get quality reports at meetings?

  • Do any members sit on clinical/risk management committees?

  • Are their term limits?

  • Do any board members have business with the hospital?

  • Go to a board meeting! – Sam Steinberg consultant

The case of Cooper University Hospital in Camden

  • Philadelphia Inquirer, March 2012

  • From 2008 to 2010 Cooper paid over $40 m to firms tied to the hospital's board of trustees, including $ for chairman George Norcross’ insurance brokerage, Conner Strong and Buckelew.

  • Cooper initially reported more “Interested Persons" transactions than any Philly hospital.

  • Cooper later amended its 2009 IRS disclosure report, reducing the reported insider dealings by 94%

How one small hospital enriched its board in Bucks County, Pa.

  • The year before filing for bankruptcy, Lower Bucks Hospital paid $2.5 million to businesses linked to 4 hospital trustees.

  • Including $1.6 million to the Seltzer Co., an insurance business (trustee Chairman Ronald Selzer was president); $1 million to a doctor on the board for his practice and $11 million to a construction firm affiliated with the vice chairman for the ER and 4th floor renovation

  • Self dealing is where a hospital does business with a company in which a governing board member (or a family member) has a financial interest. – Bucks County Courier Times

Stories on the new 990

Baltimore Sun finds the living is easy

  • Baltimore-area hospital CEOs and presidents boast seven-figure salaries, club and gym memberships, and paid financial planning and tax services . Nearly a dozen hospitals cover country club dues for top executives.

  • The highest-ranking execs often got payouts and perks that many private-sector companies have abandoned in the face of intense public debate about excessive CEO pay.

  • Eight top executives made more than $1 million, and former University of Maryland Medical System CEO Edmond F. Notebaert left with a $7.8 million pay package despite resigning amid turmoil and controversy.

  • The Baltimore Sun analyzed the compensation packages of the CEOs and presidents from 27 Baltimore-area hospitals and health systems using the 990 forms they must file with the Internal Revenue Service each tax season. The survey relied on forms from the fiscal year 2009, the most recent available.

  • Andrea K. Walker, The Baltimore Sun August 28, 2010

Cashing out of Hackensack University Med Center: How it pays to quit

President John P. Ferguson got $7.7m when he left in 2009. His senior vp got $2.6m. 7 HUMC execs each got over $1 million, up from five the year before.

  • In 2009, the center had 317 fewer staff.

  • Moodys cut its credit rating to Baa1. Two law firms recommend an overhaul of governance, including pay practices,

  • Only a few board members knew of pay.

  • Lindy Washburn, The Record

How One Reporter Did It with the old 990s

Kathleen O’Dell, Springfield News-Leader

  • CoxHealth officials confirm that the system has set aside $26 million for possible expenses and settlement of an ongoing, wide-ranging federal probe…

  • The figure appears in CoxHealth's most current Form 990. (September 16, 2007)

A nugget in Seattle hospital’s 990

Swedish Health Services, the largest health system in Seattle area (3 hospitals)

  • Paid one sleep disorder specialist $10 million in 2007. Director of Sleep Medicine Associates, a medical group with clinics and sleep labs at Swedish/Cherry Hill, Swedish/Issaquah and the Northwest Hospital

  • Board includes former Microsoft executive, Nordstrom department store heir, current chair of the Seattle Repertory Theatre Board, etc.

Radio Reporter John Ryan of KUOW-Puget Sound Public Radio

A Big Focus: How Much Do Nonprofits Give Back? Not Much in Wis.

Wisconsin hospitals, from 2003 to 2007, provided 40% less charity care and bad debt than the national average.

  • Wisconsin hospitals gave $209 million in charity care in 2007, 1.6% of their expenses, according to the Wisconsin Hospital Association. Combined with bad debt, the total was $432 million, or 3.3 percent of expenses. The national average for the two categories combined was 5.8 percent of expenses, says the American Hospital Association.

  • Hospitals often pursue patients who don't pay their bills through collection agencies and lawsuits.

  • St. Mary's Hospital in Madison made 11-15% margins and didn't      borrow any money to build its $140 million addition.

  • U.S. Sen. Chuck Grassley is pressing to require nonprofit hospitals to spend 5 percent of their budgets on charity care. This series was done before the new 990!

CEO salaries: a common finance story from the 990

  • Some nonprofit hospitals created many for-profit subsidiaries, and divided executives' salaries on each subsidiary. The new 990 seeks to prevent this.

  • Compare the biggest salaries at your local hospital to those of leaders of similar institutions in your area or in around the country. (Modern Healthcare does a survey.) Benchmarking is key to evaluating CEO salaries.

  • Contrast executive salary increases to past hospital performance. If salaries are way up, has the hospital's performance improved?

  • Reporters can now get specifics on executive benefit packages. A country club membership, first-class travel; Other perks are on 990. Nonprofits have gotten creative about designing pay packages, which often mimic those in the for-profit sector.

Story Ideas

  • How are the uninsured being treated at your local hospital? The numbers are rising nationally – so are the “underinsured” – and the combination is raising bad debt expense and charity care for many hospitals. The new 990 this year asks about a charity care policy. Are uninsured patients bargaining for care? Are they getting a better deal than before? How much does a new hip cost?

  • Hospitals’ customer satisfaction scores are public. Compare those scores with finances. Create a regional scorecard.

  • How did the credit crunch affect your hospital? SWAPs, falling interest rates, & bonds have all touched hospitals. Yet this is an underreported area. Some have paid millions to get out of SWAPs that went bad. Hospitals have also found it much harder -- and more expensive -- to borrow money, if they can borrow at all. Many building projects are stalled.

  • Despite the poor economy, hospitals are still in an arms race for new technology, from robotic surgery to vast proton therapy facilities for cancer. Well-funded hospitals are snapping up these items while poorer ones are falling behind. What key equipment is your hospital missing? What areas is your hospital investing in that may not pay off?

  • Well-endowed hospitals have large amount of investment income. How poorly has the portfolio done during the recent market meltdown? Who is managing it? How’s it doing compared to others? Is the investment firm connected to any board members?

  • The Board: Nonprofit hospitals have self-perpetuating boards that often include families through multiple generations. Members historically have been among the richest people in a community. Who is on the board and what are their healthcare qualifications? How do they help the hospital? Do board members get income from the hospital in any way? Check the independence question on the new 990.

  • Paying more for high quality (aka “pay for performance” keeps growing, albeit slowly. What are the implications for your hospital? A 2008 JAMA article concluded that pay incentive systems may worsen the disparity among hospitals.

  • The Rich Getting Richer… The top hospital providers, often the bigger systems, are generally doing ok while the weaker ones _ typically the small, stand-alone hospitals—face mounting challenges, and their size makes it harder to stay competitive, according to Standard & Poors, the bond rating agency. Which type is your hospital?

  • What do troubled hospitals do to get well? Try to attract more doctors and build more profitable services, such as heart surgeries and procedures while cutting back unprofitable areas, such as baby deliveries and clinics.

  • Community hospitals are increasingly moving to employ doctors. Many doctors want regular hours and don’t want to pay for insurance. How hospitals relate to doctors can indicate an institution’s fiscal success.

  • Hospitals are outsourcing services offshore, like many other U.S companies. Many people likely do not know that the person transcribing medical records may be in India while the doctor reading radiology films could be in Australia.

How to find hospital finance experts

  • Health policy professors in medical/public health schools

  • Academy Health shows who is researching in hospital finance

  • Hospital consultants (They work for hospitals so they may have a conflict)

  • Data firms: Am Health Directory. Many more

  • Healthcare Financial Management Association.

  • Former hospital executives

Hospital Finance Experts U.S. – Academy Health

This list was created by asking AcademyHealth for researchers working on hospital finances. Go here.

990 Experts

Further reading