Facility-Based Clinics

Question: A few years ago we moved our physicians out of the hospitals and put them into separate physician group legal entities. Accordingly, the hospitals and physicians are in separate legal entities but remain in the same EIN. We see that the IRS is requires organizations to disclose whether any physician clinic costs have been included in subsidized health services, and also requires that the hospital generates losses both on the hospital (technical) component of the service as well as the physician (professional) component of the service before physician clinics can be reported. Does this answer change when the hospital and the physician are located in two different legal entities?

Recommendation: Because these two LLCs (hospital and physician) are within the same EIN, and reported on the same Form 990, the hospital organization filing that Form 990 should aggregate the physicians clinic costs and associated hospital services costs in determining whether the clinic operated at a financial loss during the tax year. If it reports the operation of that clinic as a subsidized health service in Schedule H, Part I, line 7g, it should also describe that clinic in Part VI and list in Part VI the amount of community benefit expense from the clinic that it reported in Part I.

May 2022

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.