Apr 5, 2011

Hospital industry trade groups including the American Hospital Association, the Federation of American Hospitals and the Catholic Health Association of the United States are warning that their members may ultimately be on the hook for the coming 2.3% medical device excise tax.

In written comments submitted March 28 to the Internal Revenue Service—which has also received comments recently from AdvaMed and other medical device industry associations—hospital groups urged the agency to implement the device tax in a way that upholds “shared responsibility” among various health care providers and stakeholders. The associations are concerned that medical device manufacturers will pass on the tax to customers via higher prices, and also deduct those taxes from their federal tax revenues.

“Given their commitment to the goals of ACA (the Affordable Care Act), device companies should be prohibited from passing through the tax to their customers, including hospitals,” argued the hospital groups. “As the ACA appears to permit device companies to deduct the tax from their income for federal tax purposes, to allow device companies also  to pass through the tax to their customers would permit a financial ‘double-dip’ that could leave device companies in a better financial position than before the ACA was enacted.”

To prevent this scenario from developing, the hospital groups recommended in their written comments that the IRS prohibit manufacturers from passing the excise tax through to their customers by requiring the same certification process currently used for refunds.

In addition, the groups argue that the excise tax’s exemption for retail products including eyeglasses, contact lenses and hearing aids should be extended by the IRS to cover retail devices such as bandages, applicators, gloves and gowns sold to hospitals.


  • Stewart Eisenhart