IRS Gives Blessing to EHR Offerings from Non-Profits


Not-for-profit hospitals can now offer electronic health records (EHRs) to independent physician practices without fear of jeopardizing their not-for-profit tax status, thanks to a new advisory from the Internal Revenue Service (IRS). In fact, some believe that the ruling widens the scope of the nine-month-old exemptions to the Medicare anti-kickback and Stark physician self-referral regulations.

The IRS last week issued a long-anticipated memorandum, ruling that 501(c)(3) not-for-profit healthcare organizations may indeed purchase EHR software for physicians without penalty, as long as the purchase falls under legal exemptions specified. The move is meant to clarify an apparent conflict between existing tax code and the so-called Stark exemption. See “IRS Close to Clarifying EHR Tax Exemptions.”)

So long as the donor hospital follows the rules set last August by the Department of Health and Human Services (HHS), “we will not treat the benefits a hospital provides to its medical staff physicians as impermissible,” according to the IRS.

“We’re now clear to go,” says Scott Wallace, president and chief executive of the National Alliance for Health Information Technology, a coalition of health-IT advocates. “The really cool piece is that they didn’t impose any new rules.” Wallace says that the way the IRS worded its memo, any 501(c)(3) organization—not just hospitals—may take advantage of the Stark exemption.

The exemption allows healthcare organizations to cover up to 85% of the cost of EHR software and services for medical practices, as long as the EHR is certified as interoperable. But many hospitals were afraid to jump in once their lawyers got a chance to read the finer points of the law.

“It was a big issue because the hospitals really were worried about losing their not-for-profit status,” Wallace says.

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