The Hermann Hospital closing agreement. Is informal guidance better than no guidance at all?

Abstract

Creating barriers to communications between the IRS and the tax-exempt health care community is particularly troubling in this time of fundamental change. As exempt hospitals around the country gear up to provide service in a managed care environment, they are becoming involved in new forms of integrated delivery systems for which there is an utter lack of guidance. If the IRS is to formulate effective policy on questions involving the creation of these new health care entities, it needs to be aware of the dynamics and economic incentives at work in a managed care environment and how these incentives and dynamics differ from those in a fee-for-service context. The Hermann Hospital experience seems altogether contrary to these objectives.