Being an organization with a 501(c)(3) status, it means that ABC hospital has been exempted from paying taxes by the internal revenue service as a charitable organization. This suggests that the hospital is to serve as a charitable, educational, religious, testing for public safety or literary services. ABC hospital, as a non-profit organization, is allowed to retain earnings. However, the hospital is forbidden to distribute the gains as dividends to the persons controlling the facility or to directors, creditors, employees, and contractors. The profits are meant to be for charitable purposes. However, the hospital is misusing its non-profit status since it has not conducted a community needs assessment and has not grown in size over the past eight years despite the significant increase in profits.
Other issues include ABC using the hospital's revenue to provide bonuses to all the executives. Besides, the hospital used the income to lobby for laws favorable to its non-profit status and to the hospital in genera by providing it to state politicians. This is contrary to the rules governing not-for-profit corporations. The legal principles that govern the duties and responsibilities of fiduciaries are not drawn. Therefore, the standards applicable here are the same as those applied in for-profit fiduciaries. However, these standards recognize that not-for-profit organizations such as ABC hospitals have outstanding obligations to obey charitable purposes and guard the institution's assets.
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Violation of federal laws has devastating consequences. Therefore, as a remedy, the hospital director should pay closer attention to the obligations created by state and federal laws than to the duties imposed by corporate state laws. Another remedy could be that the hospital provides information relating to disclosure policies, governance, executive compensation, management, and transactions with interested persons. The Affordable Care Act requires non-profit organizations to disclose ascertainment of community needs, which to the Internal Revenue Code and charity care, which is one way that the hospital has misused its non-profit status.
References
Greaney, T. L., Johnson, S. H., Jost, T. S., & Schwartz, R. L. (2000). Health Law (Vol. 1). West Academic.
Kolb, R. W. (Ed.). (2018). The Sage encyclopedia of business ethics and society . SAGE Publications.
