hmgt 372 tax exempt.pdf - 2000 EO CPE Text E TAX-EXEMPT...

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E. TAX-EXEMPT HEALTH CARE ORGANIZATIONS REVISED CONFLICTS OF INTEREST POLICY by Lawrence M. Brauer and Charles F. Kaiser III 1. Introduction The 1997 CPE Text discussed a community board and conflicts of interest policy as factors the Service takes into consideration in determining whether hospitals and other health care organizations satisfy the community benefit standard in Rev. Rul. 69-545, 1969-2 C.B. 117. One significant fact demonstrating that a tax-exempt health care organization promotes the health of the community as a whole, rather than benefitting private interests, is the organization's adoption of a substantial conflicts of interest policy. The 1997 CPE Text included a sample conflicts of interest policy that can be adopted in an organization's bylaws or through resolution by its board of directors. Based on comments we received from the interested community, the sample policy has been modified in several respects, as explained below. The revised sample policy is also attached to this article. 2. Article II, Definitions A. Section 2, Financial Interest The sample policy was revised to clarify that a person having a financial interest does not necessarily have a conflict of interest. The board of directors or the appropriate board committee has the responsibility to determine, based on all the facts and circumstances, whether the financial interest of an interested person rises to the level of a conflict of interest. Thus, the following new sentence was added: A financial interest is not necessarily a conflict of interest. Under Article III, Section 2, a person who has a financial interest may have a conflict of interest only if the appropriate board or committee decides that a conflict of interest exists. 3. Article III, Procedures Several clarifications were made to the Procedures part of the sample policy.
Tax-Exempt Health Care Organizations Revised Conflicts of Interest Policy A. Section 1, Duty to Disclose Before the board or committee makes a determination whether the financial interest of an interested person rises to the level of a conflict of interest, the interested person must be given the opportunity to disclose all material facts relating to his/her financial interest. B. Section 2, Determining Whether A Conflict of Interest Exists If the interested person discloses all material facts relating to his/her financial interest, the board or committee can continue to discuss the issue with the interested person to clarify or obtain additional information relevant to the financial interest. However, before the board or committee discusses and votes on whether the interested person's financial interest is a conflict of interest, the interested person must leave the meeting. C. Section 3(a), Procedures for Addressing the Conflict of Interest An interested person with a conflict of interest in a transaction or arrangement is not precluded from making a presentation to the board or committee regarding the transaction or arrangement. However, before the board or committee discusses and votes on the transaction

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