Tax-free hospital discounts to certain classes of patients.

• Author: Royalty, Phillip G.
• Position: Brief Article

The IRS has ruled that discounts on hospital services may be provided on a tax-free basis to staff physicians and dentists, hospital employees, certain ministers and missionaries, and senior citizens (Letter Rulings 9525033 and 9506025).

The rulings involved a not-for-profit hospital, tax-exempt under Sec. 501 (c) (3). The hospital offered various discounts on inpatient and outpatient services to the following categories of individuals:

* Category I: Hospital employees, retired employees, and their dependents, who received various percentage discounts based on whether the services were inpatient or outpatient and the number of hours the employee worked per pay period. * Category II: Physicians and dentists in private practice who had been granted staff privileges by the hospital and their dependents, as well as certain resident ministers and missionaries and their dependents. None of the Category II individuals were hospital employees. Category II individuals received a 25% discount on inpatient services and a 50% discount on outpatient services. The hospital also offered a 100% discount (after insurance) to retired resident ministers with at least 15 years of service, including at least 10 years in a certain geographic locale. * Category III: Employees (and their dependents) of the church association that originally formed the hospital, and certain ministers and missionaries and dependents. These individuals...