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03-16-20

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

by Amy Clary, Elinor Higgins

While the media scrutinizes nonprofit hospitals’ valuable tax exemptions, states are taking the lead in requiring hospitals to submit more detailed community benefit reports that transcend the limitations of federal requirements from the Internal Revenue Service (IRS). States forego billions of dollars of tax revenue by granting tax exemptions to nonprofit hospitals and they have a clear interest in ensuring that hospital investments in community health yield genuine value. Some states are requiring hospitals to provide a more detailed accounting of what they claim is a community benefit, and why.

View NASHP’s community benefit reporting templates, designed to help states capture detailed information about hospitals’ community investments and outcomes here.

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.

Highlights of States’ Nonprofit Hospital Reporting Tools

Connecticut:

Its certificate of need (CON) process requires hospitals to identify community benefit dollars spent on specific needs identified by the community health needs assessment (CHNA).
Hospitals must document both actions takenand dollars spent on meeting identified needs.
Hospital reporting is mandated in CON agreements for merging hospitals and required for duration of the CON.
Hospitals are required to submit the above to the Office of Health Strategy during the CON process.

Massachusetts:

Community benefit reports from hospitals include copies of the most recent CHNA and implementation plan.
Hospitals provide self-assessment on local and regional partner engagement and success in helping to address the significant needs documented in the CHNA.
Reports include details of community benefit expenditures and how they have addressed community needs.
An optional supplemental report enables hospitals to document ways in which they are acting as an anchor institution in their community.
The report is requested – not required – by Office of the Attorney General.

New Hampshire:

Hospitals define the community area and population served by their community benefit spending.
The report includes identification of community needs from the most recent CHNA as well as other community characteristics that led to spending decisions.
The report includes a specific breakdown of how community benefit dollars were spent and on what activities.
Reports include lists of the community representatives engaged in the community benefit process.
Submission of the report is required to the Office of the Attorney General, Charitable Trusts Unit.

Vermont:

Hospitals prioritize community needs identified in their CHNAs and indicate which budget resources will be used to address the needs.
Reports describe how reported community benefit funds from the Form 990 Schedule H relate to the community assessment and implementation plan.
Hospitals are required to submit reports to the Green Mountain Care Board.

NASHP will continue to convene its community benefit workgroup and support and report on states’ leading work in this area.

Support for this work was provided by the New England States Consortium Systems Organization (NESCSO) and the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the foundation or NESCSO.