As a Roanoke citizens group raises questions about Carilion Clinic's tax-exempt status, similar concerns about nonprofit hospitals have been getting national attention.

In exchange for not having to pay taxes, nonprofit hospitals are required by the Internal Revenue Service to have a charitable mission to benefit the communities they serve.

How the hospitals fulfill that mission is the subject of recent and ongoing studies by the U.S. Senate Finance Committee, the Government Accountability Office, the Congressional Budget Office and the IRS.

A report by the GAO, the investigative arm of Congress, was recently completed and sent Friday to Sen. Chuck Grassley, R-Iowa, who requested the study more than a year ago. Grassley has 30 days to release the report; it was not clear last week when that will happen.

Grassley has questioned whether nonprofit hospitals are providing enough charity care, and whether heavy-handed debt collection practices are being applied to low-income patients.

"Some non-profit hospitals seem to forget that generous tax breaks subsidize their operations and that they're obligated to fulfill their charitable mission of serving patients," Grassley said in a statement last summer at a finance committee meeting.

In Roanoke, members of the Citizens Coalition for Responsible Healthcare contend that Carilion's dominance of the local health care market has driven prices up. At a meeting last week, the group also heard complaints about Carilion's practice of suing patients for unpaid bills.

"What we're hearing is that the collection practices of Carilion are predatory," coalition president Ken King said. Those concerns are heightened by Carilion's nonprofit status.

Nationwide, hospitals avoid paying up to $20 billion in federal, state and local taxes because of their nonprofit status, according to a draft report from the finance committee, of which Grassley is the ranking member.

Carilion officials said that in 2006, its tax break amounted to about $52 million.

In what has become known in the health care industry as the "Grassley 5 percent," the senator has proposed that nonprofit hospitals devote at least 5 percent of annual revenues to charity care in order to maintain their tax-exempt status.

By spending $42 million on charity care in fiscal year 2007, Carilion exceeded the 5 percent benchmark by $1 million, according to spokesman Eric Earnhart. The $42 million represents actual costs, not charges, and does not include $25 million in bad debt written off by Carilion and shortfalls in Medicare and Medicaid reimbursements, Earnhart said.

Some critics say putting 5 percent of revenue toward charity care is not enough. "That sounds like a penny in the bucket," said Pat Palmer, a Salem resident and founder of Medical Billing Advocates of America, which works with patients who dispute their bills.

To Palmer, it's hard to fathom that tax breaks intended for charities can be extended to Carilion, a huge corporation with net assets approaching $1 billion, more than 10,000 employees and ambitious plans to create a medical school and research park on a sprawling campus along Reserve Avenue.

"They are a nonprofit organization, but I have a problem with that when they own half of Roanoke," Palmer said.

Being nonprofit doesn't mean Carilion shouldn't be making money, though. The tax-exempt designation simply requires the company to put all proceeds back into its health care mission, not into the pockets of owners or investors.

"Not-for-profit is somewhat of a misnomer," Carilion chief financial officer Don Lorton said. "You have to make a profit to exist."