The ever-changing tax landscape’s nuance and complexity is posing challenges to the in-house finance and accounting teams at healthcare organizations. These teams often find themselves stretched thin with their core duties amidst the overwhelming demands of tax compliance and planning. This is exacerbated by the lack of adequate tax resources and expertise, resulting in tax assessments or deficiency and delinquency notices for healthcare organizations.
Healthcare organizations are required to stay updated with changes in tax laws, fulfill their compliance obligations and safeguard their growth plans. The tax expertise and resources required for such demanding tasks are further complicated by the growing influence of private equity in healthcare, multi-state implications of telehealth services, and the specificities of nonprofit health organizations.
Data shows that in 2023 there were approximately 1135 unique private equity investments into healthcare organizations. Such investments offer opportunities for healthcare institutions, however, they also bring complicated tax ramifications. Due to this, accounting teams often struggle with maintaining compliance with complex tax reporting standards for these arrangements.
The rise of telehealth services has brought about additional tax complications. Operating across multiple states can trigger a plethora of tax obligations. Details like physical presence, economic nexus, and market-based sourcing have become essential to determining state income tax and sales tax obligations.
Furthermore, nonprofit healthcare organizations face unique tax considerations that are critical to maintaining their status. Congressional interest in nonprofit hospitals may also lead organizations to revisit the quantity of charity care provided. Hence, it is important to confirm the 501(r) support and documentation, relating to the following: Community Health Needs Assessment (CHNA), Financial Assistance Policy and Emergency Medical Care Policy, Limitation on Charges, and Billing and Collections.
To mitigate these challenges and complexities, many healthcare organizations are turning to outsourcing and technology platforms. Outsourcing allows financial leaders to pivot their focus towards strategic initiatives rather than daily tax operations. This move helps address tax risks and identify cost-saving opportunities while keeping abreast with evolving healthcare accounting regulations.