IRS will let not-for-profits help subsidize Physician EHRs

The third shoe has dropped in giving hospitals federal blessing to subsidize the cost of providing electronic health-record systems software and technical support to affiliated physicians as the Internal Revenue Service today ruled that HHS-approved IT contributions won’t jeopardize the tax-exempt status of not-for-profit hospitals.

In August, HHS and the CMS issued rulings stating that hospital assistance to physicians for IT would be given safe harbor from federal anti-kickback laws, and also would be granted an exemption from Stark laws prohibiting financial inducements for referrals.

The IRS decision came in the form of a memorandum from Lois Lerner, director of the exempt organizations division of the IRS, to the directors of the ruling and agreements and the examinations sections of the division.

Lerner noted the decisions by HHS and the CMS, and that “some hospitals believe that their medical staff physicians need a financial incentive to acquire and implement EHR software that would allow the physicians to connect to the hospitals’ EHR systems.”

IRS spokeswoman Nancy Mathis said the memo was a “field directive,” an internal document directing officials within the IRS how to carry out agency business. When it comes to the IT issue, “I think it is our final answer,” Mathis said.

Tom Hyatt, a healthcare attorney with the Washington firm of Ober Kaler, said the ruling will be good news for some hospital leaders.

“I’ve got several systems that have contacted me periodically saying, ‘Has the IRS said anything yet?’ They’ve really been waiting for this to come down,” Hyatt said.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.