States Use a Sharper Lens to Scrutinize Nonprofit Hospitals’ Community Benefit Spending

The National Academy for State Health Policy (NASHP) has developed two sample hospital reporting templates to help policymakers capture the information they need to critically evaluate the community benefit investments hospitals make in exchange for their tax exemptions. The new templates, which are based on detailed community benefit reporting models from several states, ask hospitals to disclose the net dollar amounts spent on community benefit activities, as well as the goals and outcomes of those activities.

• The Hospital Expenditure reporting template requests information on how a hospital’s community benefit expenditures are intended to address needs identified in a community health needs assessment. Its questions include:
  • How much net spending was allocated to address each specific need identified in the assessment?
  • Is that money spent by the hospital directly, or does the hospital give the money to an organization or wellness fund to use to address those needs?
  • How much spending is in cash, and how much is in staff time or other in-kind donations?
• The Program Outcomes template explores how hospitals measure the goals and outcomes of their community benefit activities. Questions include:
  • What are the goals of the activities designated to address community health needs?
  • What kind of data or information is the hospital collecting to gauge its impact?
  • Who are the hospital’s partners in that work?
  • How does its investment and outcome align with state priorities?

States have the ability to encourage or require hospitals to report on their community benefit spending and activities in greater detail than currently required by the IRS to maintain their federal tax exemption. While tools such as Community Benefit Insight make it easy to see what hospitals report as community benefits to the IRS, more granular state reporting can help states determine whether hospital spending is helping move the needle on community health and upstream social and economic factors. In-depth reporting also helps demonstrate what states and communities are receiving from hospitals in return for their valuable tax exemptions.

For example, Oregon is currently developing more granular community benefit-reporting requirements. Here are some highlights:

Current Requirements:

• Each individual hospital (not health system) reports the cost of its community benefit spending across 10 categories, including charity care, community health improvement services, community building activities, and community benefit operations.
• Oregon requires the use of “Generally Accepted Accounting Principles” and provides cost-to-charge ratio worksheets.
• Oregon statutes require reporting from all hospitals, including for-profits. Non-compliant hospitals can be fined.

New Requirements under Development:

Oregon is developing methodology to assign community benefit minimum spending floors to hospitals, as outlined in HB 3076 (2019).

• At the hospital’s choosing, the minimum spending floors will be calculated for a hospital, a hospital and its affiliated clinics, or an entire health system.
• Hospitals will be required to report their clinical affiliations.
• Oregon Health Authority is developing tools to link hospital community benefit to hospital community health needs assessments and community health improvement strategies.