Schedule C of the Form 1023 is for hospitals, medical research organizations and cooperative hospital service organizations. Before answering the questions on Schedule C, it's necessary to understand how each of these organization types is defined for federal tax purposes.
Form 1023 Schedule C Table of Contents
- Form 1023 Schedule C: Types of Organizations Covered
- Form 1023 Schedule C: Medical Research Organization Determination
- Form 1023 Schedule C: Cooperative Hospital Service Organization Determination
- Form 1023 Schedule C: Open Medical Staff Policy
- Form 1023 Schedule C: Patient Admission Policy
- Form 1023 Schedule C: Emergency Medical Services
- Form 1023 Schedule C: Charity Care and Community Benefit
- Form 1023 Schedule C: Medical Training and Research Programs
- Form 1023 Schedule C: Community Health Education Programs
- Form 1023 Schedule C: Community Representation and Governance
- Form 1023 Schedule C: State Licensing and Section 501(r) Applicability
- Form 1023 Schedule C: Community Health Needs Assessment
- Form 1023 Schedule C: Financial Assistance Policy and Emergency Care Policy
- Form 1023 Schedule C: Limits on Charges and Billing Practices
- Form 1023 Schedule C: Billing and Collection Policies
Form 1023 Schedule C: Types of Organizations Covered
Hospitals
An organization is a "hospital" if its principal purpose or function is providing medical or hospital care or medical education or research.
Medical care includes treatment of any physical or mental disability or condition, on an inpatient or outpatient basis. Thus, if an organization is a rehabilitation institution, outpatient clinic, or community mental health or drug treatment center, it is a hospital if its principal function is providing treatment services, as described above.
A hospital doesn't include convalescent homes, homes for children or the aged, or institutions whose principal purpose or function is to train handicapped individuals to pursue a vocation.
Medical Research Organizations
An organization is a "medical research organization" if its principal purpose or function is the direct, continuous, and active conduct of medical research in conjunction with a hospital. The hospital with which the organization is affiliated must be described in section 501c3 501(c)(3), a federal hospital, or an instrumentality of a governmental unit, such as a municipal hospital.
"Medical research" means investigations, experiments, and studies to discover, develop, or verify knowledge relating to the causes, diagnosis, treatment, prevention, or control of human physical or mental diseases and impairments. For more information, see Regulations section 1.170A-9(c)(2).
Cooperative Hospital Service Organizations
A cooperative hospital service organization performs one or more of the specific services listed below for one or more exempt hospitals on a cooperative basis. The services listed below are exclusive. A cooperative service organization that provides services other than those listed below, or that provides services to an organization other than an exempt hospital, doesn't qualify for exemption under section 501c3 501(c)(3).
The list of qualifying services includes:
- Data processing;
- Purchasing (including the purchasing of insurance on a group basis);
- Warehousing;
- Billing and collection (including the purchasing of patron accounts receivable on a recourse basis);
- Food;
- Clinical;
- Industrial engineering;
- Laboratory;
- Printing;
- Communications;
- Record center; and
- Personnel services (including selection testing, training, and education of personnel).
Form 1023 Schedule C: Medical Research Organization Determination
Answer "Yes," if your organization is a medical research organization, as described above.
As a medical research organization, you must be associated with a hospital described in section 501c3 501(c)(3), a federal hospital, or an instrumentality of a government. Provide the name of the hospital(s) you're associated with and describe the relationship(s).
List your assets and their fair market value and the portion of your assets directly devoted to medical research. Organizations that meet this classification don't complete the remainder of Schedule C.
Form 1023 Schedule C: Cooperative Hospital Service Organization Determination
Answer "Yes," if you're a cooperative hospital service organization and describe the services you provide to your member hospitals and the exempt status of your membership. Organizations that meet this classification don't complete the remainder of Schedule C.
Form 1023 Schedule C: Open Medical Staff Policy
Answer "Yes," if all the doctors in your community are eligible for staff privileges at your facility. You must answer "Yes," even if staff privileges are limited by capacity, provided that all qualified medical professionals in your community may seek and would be considered for eligibility.
Answer "No," if all doctors in your community aren't eligible for staff privileges at your facility.
If you answer "No," describe in detail how you limit eligibility for staff privileges at your facility. Include details of your eligibility criteria and selection procedures for your courtesy staff of doctors.
Form 1023 Schedule C: Patient Admission Policy
Answer "Yes," if you admit all patients in your community who can pay for themselves or through some form of third-party reimbursement (for example, private health insurance, Medicare, or Medicaid).
Answer "No," if you limit admission for these individuals in any way and describe your admission policy in detail, including how and why you restrict patient admission.
Form 1023 Schedule C: Emergency Medical Services
Answer "Yes," if you offer emergency medical or hospital care at your facility on a 24-hour basis, seven days a week.
Answer "Yes," if the reason you don't maintain a full-time emergency room is either because you're a specialty hospital where emergency care would be inappropriate for the services you provide or another emergency medical care facility that provides such services is located so near to you as to make such services as you might provide duplicative.
Form 1023 Schedule C: Charity Care and Community Benefit
Answer "Yes," if you provide free or low-cost medical or hospital care services. If you answer "Yes," describe your policy and to whom you provide these services. Include details on how these services promote benefits to the community.
You may want to indicate how you determine who is eligible for the services, how you inform the general public about your policy, any requirements you require of patients to receive reduced cost or free care, and any agreements you might have with municipalities or government agencies to subsidize the cost of admitting or treating patients through this policy.
Form 1023 Schedule C: Medical Training and Research Programs
Answer "Yes," if you have a formal program of medical training and research. If you answer "Yes," describe your program, including the programs you offer, the scope of such programs, and affiliation with other hospitals or medical care providers with which you carry on the medical training or research programs.
Form 1023 Schedule C: Community Health Education Programs
Answer "Yes," if you have a formal program of community educational programs and describe your programs, including the types of programs offered, the scope of the programs, and affiliation with other hospitals or medical care providers with whom you offer community educational programs.
Form 1023 Schedule C: Community Representation and Governance
Answer "Yes," if you have a board of directors that is representative of the community you serve or if an organization described under section 501c3 501(c)(3) with a community board exercises rights or powers over you.
Answer "Yes," if you're subject to a state corporate practice of medicine law that requires your governing board to be composed solely of physicians licensed to practice medicine in the state.
List each board member by name and describe that person's relationship to you. Also, for each board member, describe if and how that individual represents the community.
Generally, hospital employees and staff physicians aren't individuals considered to be community representatives. If you operate under a parent organization whose board of directors isn't comprised of a majority of individuals who are representative of the community you serve, provide the requested information for your parent organization's board of directors as well.
Form 1023 Schedule C: State Licensing and Section 501(r) Applicability
Answer "Yes," if you operate a facility that is required by a state to be licensed, registered, or similarly recognized as a hospital. Organizations that respond "Yes," to this question are required to meet additional requirements described in section 501(r) to be considered a hospital exempt from taxation by section 501(c).
Form 1023 Schedule C: Community Health Needs Assessment
A community health needs assessment (CHNA) is an assessment of the significant health needs of the community. To meet the requirements of section 501(r)(3), a CHNA must take into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health, and must be made widely available to the public.
Each hospital facility must conduct a CHNA at least once every 3 years and adopt an implementation strategy to meet the community health need identified through such CHNA.
Answer "Yes," if the hospital facility conducted a complying CHNA in the current tax year or in either of the 2 immediately preceding tax years or if the hospital facility intends to conduct a CHNA before the end of its first 3-year period.
Form 1023 Schedule C: Financial Assistance Policy and Emergency Care Policy
A financial assistance policy (FAP), sometimes referred to as a charity care policy, is a policy describing how an organization will provide financial assistance at its hospital(s) and other facilities, if any.
Financial assistance includes free or discounted health services provided to persons who meet the organization's criteria for financial assistance and are unable to pay for all or a portion of the services.
Financial assistance doesn't include:
- Bad debt or un-collectible charges recorded as revenue but written off due to a patient's failure to pay;
- The difference between the cost of care provided under Medicaid or other means-tested government programs or under Medicare and the revenue derived therefrom;
- Self-pay or prompt pay discounts; or
- Contractual adjustments with any third-party.
Answer "Yes," if the hospital facility has adopted a written financial assistance policy and a written policy relating to emergency medical care as required by section 501(r)(4).
Form 1023 Schedule C: Limits on Charges and Billing Practices
Under section 501(r)(5), the maximum amounts that can be charged to FAP-eligible individuals for emergency or other medically necessary care are the amounts generally billed to individuals who have insurance covering such care.
Answer "Yes," if the hospital facility limits or will limit any charges to FAP-eligible individuals to not more than the amounts generally billed to insured individuals and prohibits, or upon beginning operations will prohibit, the use of gross charges.
A hospital facility may still answer "Yes," if excess charges weren't required as a pre-condition of care, if the individual hadn't yet been determined to be FAP-eligible, and if any excess amounts are refunded after eligibility is established, unless the excess amount is less than $5.
Form 1023 Schedule C: Billing and Collection Policies
Answer "Yes," if the hospital facility has, or will have at the beginning of operation, either a separate written billing and collections policy or includes in a written financial assistance policy:
- A description of any actions that may be taken to obtain payment of a bill, including any extraordinary collection actions;
- The process and time frames used in taking those actions; and
- The office, department, committee, or other body with final authority for determining whether reasonable efforts were made to determine financial assistance eligibility before engaging in collection actions.