The Structure of the Health Care Enterprise

Question 1

Duty of care

Answer 1

Board members must act in good faith as reasonably prudent person in similar position & circumstances would act (e.g. stay informed)

Question 2

Duty of loyalty

Answer 2

Act in best interest of Corp. (e.g. avoid self-dealing and Conflicts of interest)

EXAMPLE: even if you could make money from a certain transaction, you might not move forward with that transaction if it is not in the best interest of the hospital.

Question 3

Organizational test

Answer 3

Organizing docs limit activities to exempt purposes

Question 4

Operational test

Answer 4

Must be operated primarily for exempt purposes

Question 5

The 3 fundamental conditions for tax exemption are:

Answer 5

1. No earnings inure to the benefit of individuals
2. No substantial activities aimed at influencing legislation
3. No participation in political campaigns on behalf of candidates

Question 6

Hospitals must meet all of the following 501(r) requirements:

Answer 6

1. Community health needs assessment
2. Financial Assistance Policy (FAP) & Emergency Medical Care Policy
3. Charge limitation for FAP-eligible patients
4. Billing and collection limitations

Question 7

Private inurement:

Answer 7

Insider (officer, director & their close relatives) receives any of organization’s net income or inappropriately uses any of its assets for personal gain.

Question 8

Private benefit:

Answer 8

Broader than private inurement- individual or organization (insider or outsider) receives monetary or nonmonetary benefit from 501(c)(3) organization

Question 9

Physician recruitment four scenarios checklist; rules governing recruitment by tax-exempt hospitals

Answer 9

1. Objective evidence demonstrating need for the type of physician
2. Pmt is reasonable & no more than necessary to get Dr. to join medical staff
3. Recruited physician becomes member of medical staff
4. Incentive furthers hospital’s exempt purpose & meets hospital need

Question 10

Excess benefit transaction:

Answer 10

Transaction in which economic benefit provided by 501(c)(3), directly or indirectly:

1. To or for use of disqualified person, and;
2. Value of economic benefit is greater than the value of consideration provided (e.g. insider’s services).

-Very hefty penalties for this

Question 11

Excess Benefit Transaction EXAMPLE

Answer 11

You’d pay a doctor who’s on the board of directors for the work that they’re doing in an administrative capacity, and NOT more than that. You don’t give them a Mercedes Benz as a Christmas present (unless that was part of the deal in recruiting them, I guess).