Federal laws/regulations;

OLR Research Report

August 8, 2001





By: John Kasprak, Senior Attorney

You asked for information on the “Hill-Burton Act,” which involves hospital care and assistance for the medically uninsured. You also want to know if state or federal law addresses denial of health care by a hospital.


In 1946, the U. S. Congress passed a law (the “Hill-Burton Act”) that gave hospitals and other health facilities money for construction and modernization projects. In return, facilities receiving these Hill-Burton funds agreed to (1) provide a reasonable volume of services to people unable to pay and (2) make their services available to all people residing in the facility's area. The federal Department of Health and Human Services (HHS) is responsible for the program's administration.

The number of facilities around the country with continuing Hill-Burton obligations has decreased substantially. In Connecticut, no hospitals continue to have Hill-Burton obligations. But some nursing homes, an outpatient facility, a rehabilitation facility, and the state health laboratory do.

No state law requires hospitals to treat all patients, regardless of their ability to pay. But federal income tax law is relevant to the question. Most hospitals are organized as nonprofit corporations. Standing alone, nonprofit status confers no special tax advantage. But many nonprofits, including hospitals, are eligible for tax relief because they also qualify as charitable organizations.

Section 501(c)(3) of the federal tax code exempts corporations organized and operated for religious, charitable, scientific, or educational purposes from federal income tax. Initially, the internal Revenue Service (IRS) required charitable hospitals to give free care “to the extent of their financial ability. ” This was later modified, as more people became insured by private insurance and government programs, to allow hospitals to enjoy tax-exempt status on the condition that they not discriminate among paying patients and that they treat all indigent emergency patients for free. A later ruling held that even free emergency care is not required if an emergency room is not needed or appropriate at a hospital.

A federal law, known as the “patient anti-dumping” statute, basically requires hospitals participating in the Medicare program to treat patients with potential emergency conditions.

Connecticut law addresses the conversion of a nonprofit hospital to a for-profit entity through a sale or other transfer of a material amount of its assets or operations. Both the state attorney general and the Office of Health Care Access (OHCA) commissioner must review and approve the transaction. In order to approve the proposal, they must consider issues concerning access to care, including charitable care provided to the community.

Some hospitals in the state have “bed funds” providing free patient care in some cases. The attorney general is responsible for overseeing the proper use of these funds.


The federal “Hospital Survey and Construction Act of 1946,” also known as the “Hill-Burton Act,” provided federal support for the construction and modernization of hospitals and other health care facilities, such as nursing homes. Hospitals and other facilities that received Hill-Burton funds incurred an obligation to provide a certain amount of charity care. This act is the only federal legislation that ever offered a broad promise of hospital care to everyone regardless of ability to pay. It launched a nationwide hospital-building program, designed to provide the necessary number of staffed hospital beds per 1000 people throughout the country, regardless of race, color, creed, gender, or ability to pay.

Specifically, the act required hospitals receiving program funds to provide uncompensated care each year for 20 years in an amount matching the lesser of 3% of its annual operating costs or 10% of the total federal assistance received. Individual hospitals set their own income eligibility cutoffs between 100% and 200% of the federal poverty level. Nationwide, the program aided indigent care in thousands of hospitals, particularly nonprofit facilities, by setting a minimum standard for provision of uncompensated care and providing a national program to which poor or uninsured individuals could turn to for information on free care services.

With the passage of Medicare and its capital payments to hospitals, Hill-Burton was phased out, and the number of facilities with continuing obligations has dwindled significantly. In the early 1980s, more than 4000 hospitals were still under Hill-Burton obligations. As of August 2001, 600 facilities still had such obligations. In Connecticut, seven facilities, none of them hospitals, continue to have Hill-Burton obligations. These include four nursing homes, one rehabilitation facility, one outpatient facility, and the state health department laboratory. Table 1 following gives more detail on these facilities.

Table 1– Connecticut “Hill-Burton” Obligated Facilities, as of August 2001

Facility Name

Facility Type

Telephone #

Facility Address


Rehab Ctr. Fairfield Co

Rehab Facility


226 Mill Hill Avenue


Nathaniel Witherell

Nursing Home


70 Parsonage Road


Avery Hgts Nrsng Home

Nursing Home


705 New Britain Avenue


State Health Dept Lab

State Health Dept. Lab


10 Clinton Street


Fair Haven Comm Health CT

Outpatient Facility


374 Grand Avenue

New Haven

Hewitt Memorial Home

Nursing Home


230 Coram Avenue


Saint Mary Home

Nursing Home


2021 Albany Avenue

West Hartford


Federal tax law, specifically whether a hospital qualifies for exemption from federal income tax as a charitable organization ( 501(c)(3)) of the Internal Revenue Service Code) is important to the question of access to care for all. To qualify for the exemption, a nonprofit hospital must be organized and operated exclusively to further some purpose considered “charitable” in the generally accepted legal sense of the term, and the hospital may not be operated, directly or indirectly, for the benefit of private interests.

In the general law of charity, the promotion of health is considered to be a charitable purpose (see “Restatement (Second), Trusts,” 368 and 372, as referenced in IRS Revenue Ruling 69-545, 1969-2 C. B. 117). A nonprofit organization whose purpose and activity is providing hospital care is promoting health and may, therefore, qualify as organized and operated to further of a charitable purpose (Rev. Ruling 69-545).

Relevant IRS Rulings

Three significant IRS rulings relate to this issue.

1956 Ruling. This ruling (Rev. Ruling 56-185) addressed the criteria or tests to be met in determining whether a hospital can qualify for federal income tax exemption as a public charitable organization.

One of the criteria was that the hospital must be operated to the extent of its financial ability for those not able to pay for the services rendered and not exclusively for those who are able to pay. The ruling continues,

it is normal for hospitals to charge those able to pay for services rendered in order to meet the operating expenses of the institution, without denying medical care or treatment to others unable to pay. The fact that its charity record is relatively low is not conclusive that a hospital is not operated for charitable purposes to the full extent of its financial ability. . . it must not, however, refuse to accept patients in need of hospital care who cannot pay for such services. Furthermore, if it operates with the expectation of full payment from all those to whom it renders services, it does not dispense charity merely because some of its patients fail to pay for the services rendered” (Rev. Ruling 56-185, 1956-1 C. B. 202).

1969 Ruling. This ruling (69-545) modified the 1956 ruling concerning requirements related to caring for patients without charge or at rates below cost, replacing the charity care standard with more of a “community benefit” standard.

According to the 1969 ruling, a hospital is exempt from federal income tax under 501(c)(3) if it operates a full time emergency room with no one requiring care denied treatment. The hospital can otherwise ordinarily limit inpatient admission to those who can pay the cost of their care, whether payment is made by themselves, private health insurance, Medicaid, Medicare, or local assistance. Patients who do not meet financial requirements for admission should ordinarily be referred to another hospital in the community that does serve indigent patients.

1983 Ruling. This ruling held that a nonprofit hospital that is not required to operate an emergency room where a state or local health planning agency has found this would unnecessarily duplicate emergency services and facilities that are adequately provided by another medical institution in the community was exempt under 501(c)(3); Rev. Ruling 83-157, 1983-2 C. B. 94).


The federal “anti-dumping” statute ( 1867 of the Social Security Act; 42 Us Code 1395dd) establishes federally mandated responsibilities of Medicare-participating hospitals to individuals with potential emergency conditions. Under this law, a hospital must provide to anyone who seeks emergency services an appropriate medical screening examination sufficient to determine whether he has an emergency medical condition, as defined in statute. When appropriate, the screening must include ancillary services routinely available at the hospital. If the person is determined to have an emergency condition, the hospital must stabilize the condition, within its available staff and facilities before discharging or transferring the patient. If the patient's condition cannot be stabilized before a transfer requested by the patient (or determined to be in his best interest by responsible medical personnel), the hospital must follow very specific statutory requirements designed to make a safe transfer to another facility.

The federal Department of Health and Human Services can terminate the hospital's Medicare provider agreement for violation of the anti-dumping statute and impose civil monetary penalties against both the hospital and physician responsible for examination and treatment.


State law (PA 97-188; CGS 19a-486 to 486h) requires review and approval by the attorney general and the OHCA commissioner when a nonprofit hospital agrees to a sale or other transfer of a material amount of its assets or operations, or to a change in the control of operations, to a for-profit entity. In order to approve the agreement, OHCA 's review must find that (1) the affected community is assured of continued access to affordable care and (2) the purchaser has committed to providing health care to uninsured and under-insured people. The attorney general must also review the proposal with consideration given to a variety of standard, including charitable health care.

Sharon Hospital is currently undergoing this process as a for-profit company seeks to acquire the facility.


Some hospitals in the state have “hospital bed fund trusts'” which are basically gifts of money or stock donated to the facility to endow a free bed in the facility or to create a fund to provide free patient care. State law charges the attorney general with representing the public interest in the protection of any gifts, legacies, or devises intended for such public or charitable purposes. An individual unable to pay a hospital bill should check with the facility to see if such a bed fund exists.

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