The House Ways and Means Committee opened its inquiry on tax exemptions for nonprofit hospitals last week by asking ten of the nation's largest nonprofit hospitals detailed questions about their operations, the Baltimore Sun reports.

Both houses of Congress are looking broadly at tax deductions given to charitable organizations. The focus of the most recent House inquiry is to determine whether the community benefit of such deductions justifies the cost, in lost revenue, associated with them. House Ways and Means Committee chairman Rep. Bill Thomas (R-CA) said he picked hospitals for a detailed examination because they are the largest single type of charitable organization. "We really can't tell the difference, all that much, between a for-profit and a not-for-profit. What is the taxpayer getting in return for the tens of billions of dollars per year in tax subsidy?"

Almost all of Maryland's hospitals are nonprofits, so a change in their tax status could have a huge impact on institutions that are large employers and providers of care, ranging from small rural hospitals to Johns Hopkins. At the request of the Maryland state legislature, the state's Health Services Cost Review Commission is preparing a "community benefits report" detailing the charitable activities of Maryland hospitals. According to Nancy Fiedler, senior vice-president of the Maryland Hospital Association, community-benefit activities by hospitals in the state include "mission-driven services" such as clinics for the poor; operating some services, such as mental health programs and care for newborns, at a loss to meet community needs; payments for physicians to be on call for emergencies; and ensuring access to care.

Internal Revenue Service Commissioner Mark Everson told the committee that the agency grants an exemption to hospitals that show evidence of community benefit, but the line between hospitals operating for profit and for charitable purposes has blurred. "We at the IRS are now faced with a healthcare industry in which it is increasingly difficult to differentiate for-profit from nonprofit healthcare providers," said Everson.