[Congressional Record Volume 142, Number 11 (Friday, January 26, 1996)]
[Senate]
[Pages S509-S510]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GLENN (for himself and Mr. Gorton):
  S. 1538. A bill to amend the Internal Revenue Code of 1986 to provide 
for the treatment of excess benefit arrangements for certain tax-exempt 
group medical practices, and for other purposes; to the Committee on 
Finance.


                  GROUP MEDICAL PRACTICES LEGISLATION

 Mr. GLENN. Mr. President, our Nation's few nonprofit medical 
practices have a well-deserved, international reputation for medical 
excellence. Among those prestigious institutions is the Cleveland 
Clinic, considered one of the world's finest medical facilities. The 
Cleveland Clinic and other outstanding facilities such as the Virginia 
Mason Clinic in Seattle, WA, and the Mayo Clinic in Rochester, MN, 
provide significant charity care, offer outstanding medical education 
and training, lead in medical research and are deeply involved in 
community service.
  However, compensation rules for non-profit employers--including 
teaching hospitals, community clinics, and integrated health systems, 
are governed by stringent limits on reasonable compensation which do 
not apply to physicians in private practice or in the for-profit 
sector.
  Today I am introducing along with the distinguished Senator from 
Washington [Mr. Gorton], legislation to amend the Internal Revenue Code 
to provide a limited exemption from IRC section 457 to eligible group 
medical practices. It would increase the dollar limitations for members 
and employees of those practices from the limitations of section 
457(c)(2).
  I believe that this change in law would be good public policy. With 
flexibility to offer reasonable deferred compensation packages, these 
clinics can continue to recruit and retain the high quality individuals 
whose training, skills, and experience are crucial to the patient 
population they serve.
  An important way to encourage physician groups and other medical 
professionals to continue to organize in a not-for-profit status. 
However, current law provides for disincentives for this not-for-profit 
status. This legislation would remove these obstacles.
  Mr. President, companion legislation has already been introduced in 
the House. I urge the Senate Finance to carefully review the issues 
that we raise in this legislation and I urge my colleagues to join me 
in support of this measure.
 Mr. GORTON. Mr. President, today Senator Glenn and I are 
introducing a limited, but important piece of legislation. This 
legislation will provide a solution to a vexing problem that afflicts 
many of the most distinguished not-for-profit group medical practices 
in this country, such as Virginia Mason Clinic in Seattle, the Mayo 
Clinic in Rochester, and the Cleveland Clinic in Cleveland.
  Our Nation's not-for-profit medical practices, which include teaching 
hospitals, community clinics, and integrated health systems, perform 
essential public services. They provide significant charity care to our 
Nation's poor and elderly, offer some of the finest medical education 
and training in the world, and are acknowledged leaders in medical 
research. Furthermore, not-for-profits perform these public services 
while maintaining a well-deserved, international reputation for medical 
excellence.
  Despite their excellent delivery of essential medical services, tax 
laws restrict not-for-profit group medical practices from offering 
their medical professionals a level of deferred compensation that is 
competitive with that available to physicians in the for-profit sector. 
These limits on deferred compensation exist even though medical 
professionals in nonprofit practices already sacrifice substantial 
personal benefits and competitive salaries in order to serve the most 
needy in their communities. This sacrifice on the part of nonprofit 
physicians has potentially damaging repercussions for society when 
physicians leave the nonprofit sector for the benefits of the private 
sector.
  Today, we seek to remove some of the disincentive that exist for 
medical professions to enter into the nonprofit area of health care. 
The bill we are introducing amends the Internal Revenue Code to provide 
a limited exemption from IRC section 457 to eligible group 

[[Page S510]]
medical practices. This amendment would increase the dollar limitations 
for members and employees of those practices, index the deferred amount 
for inflation, and exempt eligible medical group practices from 
limitations of section 457(c)(2).
  By providing nonprofit, teaching, medical centers the ability to 
offer deferred compensation packages to their professions at levels 
that are competitive with the for-profit sector, our nonprofit medical 
centers will be able to recruit and retain the caliber of individuals 
whose training skills, and expertise are crucial to the often inner-
city or rural patients they serve.
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