- Align hospital investments with the needs of their communities;
- Address the lack of focus on equity in existing community benefit strategies and investments; and
- Ensure responsible use of the nonprofit hospital charitable tax exemption.
How Hospitals Address COVID-19 Inequities
Hospitals are on the front lines of this pandemic; many struggle to meet surge demands for care, which are straining hospital staff and budgets. Despite these challenges, some hospitals are also reaching out to their communities and creating partnerships to improve access to COVID-19 testing and treatment for populations that have been disproportionately impacted.
The Catholic Health Association has outlined how hospitals can shift their community benefit programs to respond to the pandemic through community health improvement activities, such as:
- Promoting awareness and education activities for the community and first responders (e.g., telephone hotlines, public service announcements, and media responses);
- Charging only nominal fees for services or screenings for COVID-19 and flu immunizations, and improving access through mobile units and off-site testing;
- Having executive and other employee time dedicated to planning for and recovering from the public health emergency;
- Providing community mental health services;
- Launching interventions to address the social needs of the community (e.g., social and environmental improvements, such as reducing food and housing insecurity); and
- Establishing command centers specific to disaster readiness.
These community health improvement activities have the potential to help address the underlying inequities leading to disparities in COVID-19 and other health outcomes. This represents a sea change as most hospitals have not addressed the equity concerns that communities raise, and community health improvement activities represent only 0.37 percent of total community benefit spending, according to 2014 IRS data.
There are some examples of hospitals that do address COVID-19 inequities though community health improvement services. These bright spots exemplify the importance of:
- Responding to community health needs identified by community residents;
- Partnering with community-based organizations that serve and have the trust of historically marginalized populations; and
- Leveraging hospital data to identify needs, as well as the critical importance of addressing social determinants of health, such as education and employment.
These examples demonstrate ways that hospitals can address equity.
- Children’s Hospital of Philadelphia partnered with the Philadelphia Housing Authority (PHA) and a local catering company to provide free family dinners at two PHA locations in West Philadelphia from April through June.
- MetroHealth (Cleveland) Institute for HOPE and the Greater Cleveland Food Bank are partnering to deliver fresh produce directly to patients’ homes. The hospital identified patients who most need the food deliveries by looking at its top utilizer zip codes and identifying people who had been regularly visiting its on-site food distribution.
- Kaiser Permanente has dedicated $1 million to increase capacity for preventing and treating COVID-19 among the homeless. Kaiser has partnered with National Health Care for the Homeless Council to make grants to local homeless shelters to increase their capacity for services and outreach.
Community Benefit Obligations of Nonprofit Hospitals during the Pandemic
Nonprofit hospitals have a mandated Internal Revenue Service (IRS) obligation to provide community benefit, even if they are struggling to meet the demands of COVID-19. In 2011, hospitals benefited from at least $24.6 billion in tax exemptions, according to a 2015 analysis that used the most recent data available. In lieu of these taxes, hospitals are required to provide community benefits. According to a recent study, community benefit spending remained flat between 2011 and 2017, and community benefits may shrink as hospitals grapple with diminishing bottom lines amid the pandemic.
Every three years, the IRS requires nonprofit hospitals to complete a community health needs assessment (CHNA) with input from a public health department and medically underserved, low-income, and minority populations in their communities.
It is particularly challenging to engage residents and community leaders in this time of social distancing when many hospital staff are working at or over capacity to respond to COVID-19. Some nonprofit hospitals have been granted an extension until the end of the year to complete their scheduled CHNAs. Others may choose to do a limited or rapid needs assessment to update their pre-COVID-19 assessments. However, if CHNAs are not completed or are not updated to take COVID-19 into account, it raises the question of how hospitals will respond to urgent community needs and continue to meet the requirements of their tax-exempt status.
CHNAs have been the key method states have used to ensure that hospital community benefit investments are directed toward current community needs, as expressed by communities. Some states, as detailed below, go beyond the federal requirements through legislation and licensure to explicitly require that hospitals tie their community benefit implementation plans to their needs assessments. As COVID-19 reveals long-standing health inequities, it is more important than ever that hospitals work with residents to identify and address community needs and underlying inequities.
Currently, a focus on equity in community benefit strategies and investments in CHNAs is lacking – though equity is raised when assessing community needs. A 2016 study of urban nonprofit hospital CHNAs found that 65 percent cited health disparities or health equity explicitly, 100 percent referenced health equity implicitly, and 75 percent reported that external stakeholders identified health equity as a need. Yet, only 46 percent prioritized health equity in their CHNAs and a mere 9 percent of the hospitals’ implementation strategies included activities explicitly designed to improve health equity.
States are beginning to address this disconnect because equity is a demonstrated, high-priority need that the pandemic has laid bare. Community benefit is a lever states are beginning to pull.
Current State Efforts to Leverage Community Benefit Investments
States are continuing, even now, to leverage hospital community benefit requirements and hold hospitals accountable to invest in community health improvement. They’re using a variety of state levers, including state licensure and certificate/determination-of-need approval processes.
This is especially important now because charity care – a component of community benefit – may increase due to the economic downturn. States that want hospital community benefit programs to also focus on addressing community needs and social determinants of health will need tools to communicate their expectations and monitor modifications.
States are going beyond the federal community benefit requirements to ensure:
- Authentic and meaningful community engagement and input;
- A focus on identifying, tracking, and reducing disparities identified in CHNAs;
- Community benefit spending advances state priorities as identified in CHNAs and statewide health improvement plans;
- Hospitals work with public health to align assessment and tap the capacity of public health to address health equity and social determinants of health;
- Investments in equity are in alignment with state-supported, local, cross-sector collaboratives addressing health equity; and
- Hospital community benefit reporting that makes transparent the connection between real investments and identified community needs.
Ensuring Authentic and Meaningful Community Engagement and Input
States can work to ensure that hospitals truly seek out and act on meaningful input from a wide range of community representatives. Prior to the outbreak of COVID-19, Maryland enacted legislation (effective July 1, 2020) requiring its Health Services Cost Review Commission to establish a Community Benefit Reporting Workgroup and to adopt regulations based on workgroup recommendations. This law expands on the federal requirements for community engagement by requiring that the workgroup include people impacted by hospital community benefit spending. The law also requires hospitals to not only solicit and take into account input from individuals who represent the interests of their communities, but also to conduct their CHNAs in consultation with community members, which may look different due to COVID-19, but remains critical.
In addition, four states (California, New Hampshire, New York, and Rhode Island) statutorily require that certain communities or groups, such as community organizations, members of the public, or racial and ethnic minorities, be represented in the CHNA, above and beyond what the federal government requires. A Texas statute encourages hospitals to consult with certain groups or entities when assessing community needs. Researchers have also recommended that states require engagement of community members and organizations in the development of community benefit implementation plans, in addition to the CHNA.
Community health improvement initiatives are proven to be more effective when communities are engaged throughout the process. The examples above illustrate some strategies for engaging the community in needs assessment and are feasible even during a pandemic. Hospitals can develop partnerships with community organizations that serve and have the trust of vulnerable communities. They can also analyze patient data to identify needs and combine them with direct input from community members.
Identifying and Tracking Reductions in Disparities in CHNAs
Maryland requires CHNAs to describe a hospital’s effort to track and reduce disparities in the community. Requiring efforts to address health disparities as part of state community benefit requirements is a critical policy to improve equity, yet is not a federal requirement nor are disparities even mentioned in the federal regulations.
Addressing Community Needs and Advancing State Priorities
States are working to ensure that community benefit implementation plans address the needs identified by the CHNA process using strategies for engaging the community in needs assessment. Maryland’s new law requires hospitals to submit an annual report describing how each of the activities undertaken by the hospital addresses the community health needs of the hospital’s community, a description of gaps in the availability of providers to serve the community, and a list of the unmet community health needs identified in the most recent CHNA. Although this law is new, other states may find it a useful model for tying community benefit investments to documented needs.
Some states have aligned their community benefit requirements with State Health Improvement Plans (SHIPs) developed by public health departments. New York requires that hospital Community Health Improvement Plans specifically address goals contained in its SHIP, known as the Prevention Agenda 2019-2024. New York also requires hospitals to report their community benefit spending, and how it relates to its prevention agenda. Improvement plan.
Massachusetts has aligned community benefit requirements with state health priorities by tying the Department of Public Health’s Determination of Need process to standards for community engagement and social determinant of health investing. While the process is currently underway, the Massachusetts Attorney General’s office is considering how to give nonprofit hospitals the flexibility to bring an equity lens to addressing the needs revealed by COVID-19.
Promoting Collaboration with Public Health Departments
New York encourages hospitals to work with public health departments on both their CHNAs and the related community health improvement plans. This link to public health is a key policy to ensure the capacity to address health equity, which is a foundational principle of public health. The authors of the 2016 study of CHNAs conclude that hospitals might have the will to promote health equity, but not necessarily the know-how.
Working with public health departments is also important to reduce duplication, considering both nonprofit hospitals and public health departments conduct regular community health needs assessments. Maryland requires hospitals to consider the most recent community needs assessment developed by the state or local health department when identifying community health needs. Five states go further (ME, MA, NH, NY, and TX), requiring or encouraging local public health officials to be involved in the community needs assessment process.
Aligning Community Benefit with Local Health Improvement Coalitions
In 2015, Rhode Island began implementing Health Equity Zones (HEZs) which now exist in 10 communities across the state. HEZs are geographic areas where the Rhode Island Department of Health invests a blend of funding streams to address differences in health outcomes. Local, cross-sector coalitions conduct a collaborative, community-driven needs assessment and implement a plan to address the identified needs. For example, the Southside, Elmwood, and West End Health Equity Zone in Providence galvanized residents to advocate for housing as a social determinant of health, achieving the remediation of several blighted properties, hosting a Neighborhood Housing Summit, and advancing equitable housing policy.
Rhode Island (prior to COVID-19) required two hospitals to invest in their local HEZs and collaborate with them on their CHNAs as a condition of approval for changes sought under the Hospital Conversions Act, which governs changes in hospital ownership and significant reductions in certain hospital services. Although not directly tied to community benefit, the advent of Rhode Island’s Health Equity Measures this year creates additional opportunities for alignment between the HEZs, the state’s health equity goals, measures, and hospital community benefit.
Establishing Transparent Reporting that Ties Investments to Community Need
Maryland requires nonprofit hospitals to submit an annual community benefit report including a list of the initiatives that were undertaken by the hospital and the cost of each. New York asks hospitals to report itemized community benefit spending. Connecticut, as a part of its certificate-of-need process, similarly requires that hospitals identify community benefit dollars spent on specific needs identified in their CHNAs. New Hampshire and Vermont also require hospitals to report community needs from the most recent CHNA and tie these to community benefit spending.
The Way Forward
COVID-19 has drastically altered the health care landscape in the United States. As states struggle with reduced budgets and revenue, they need to leverage every resource available for community health improvement, particularly for the most vulnerable residents. Hospitals are on the frontline in communities, leading testing and treatment. Community benefit provisions hold nonprofit hospitals accountable for investing in communities in return for the federal tax breaks they receive. As hospitals pivot community benefit investments to respond to COVID-19, states can ensure that the underlying inequities exposed by the pandemic are addressed. States can develop strategies that hold hospitals accountable while balancing the many COVID-19-related demands. States can and are going beyond federal community benefit regulations to ensure that the associated investments are responsive to the needs of their most at-risk populations to reduce glaring inequities and move, ultimately, toward long-term resilience for all communities.
A 2016 New Jersey law gave the state flexibility to share bid information submitted by all pharmacy benefit managers (PBMs) in order to incentivize the PBMs to submit lower offers in additional rounds of bidding – a process known as a reverse auction. While reverse auctions have been used historically to procure goods, New Jersey’s first-in-the-nation PBM model represents a new way states can procure services and save millions on prescription drug spending.
Tax exemptions for nonprofit hospitals cost states billions of dollars in lost tax revenue each year. In return, hospitals are required to invest in activities and services that benefit their communities. Some states, including Oregon and Connecticut, are going beyond federal requirements by holding hospitals accountable for making meaningful investments in the community’s health and well-being that meet genuine community needs — determined by the community itself — and align with state health priorities.
The Internal Revenue Service (IRS) defines certain hospital investments as community benefit activities. Examples include providing financial assistance to patients (also called charity care), covering shortfalls resulting from Medicaid participation, funding health professionals’ education programs, and subsidizing services such as neonatal intensive care and trauma services. Hospitals can also count “community health improvement services,” or hospital programs that don’t generate revenue, as community benefits.
Of particular interest to states seeking to bolster population health by improving their residents’ social and economic conditions, is the fact that hospitals can also count some “community building” activities toward their community benefit investments, although some experts have identified a need to clarify the process by which those activities are counted as community benefit. The IRS defines “community building” activities as activities that “protect or improve the community’s health or safety,” including investments in:
- Housing (the IRS addressed these investments in a short update on Dec. 18, 2015);
- Economic development;
- Community support, such as child care and mentoring programs;
- Environmental improvements, such as addressing air or water pollution or protecting the community from other environmental hazards; and
- Leadership development, coalition building, community health improvement advocacy, or workforce development.
Some states — such as Oregon and Connecticut — are using the federal requirements for tax-exempt hospitals to invest in community benefit activities as a springboard to ensure robust and meaningful hospital investments that address the needs of the community.
On June 25, 2019, Oregon Gov. Kate Brown signed HB 3076, which strengthens that state’s community benefits requirements in two ways:
- It requires hospitals to expand the range of income levels that qualify for charity care; and
- It establishes a minimum community benefit spending floor for nonprofit hospitals, set every two years by the Oregon Health Authority (OHA), in collaboration with the hospital or health system.
The law specifies that hospitals reduce to zero the cost to patients of medically necessary care for people whose incomes do not exceed 200 percent of the federal poverty level (FPL) guidelines. For people earning up to 400 percent of FPL, the law establishes a sliding scale – the hospital must reduce charges by at least 75 percent for people earning up to 300 percent of FPL, implement at least a 50 percent reduction for people earning up to 350 percent of FPL, and at least a 25 percent reduction for people earning under 400 percent of FPL. The law allows hospitals to seek reimbursement for those patient costs from other payers, such as those with third-party liability, and requires patients to share information to help hospitals collect payment from other payers.
This financial assistance standard is new for Oregon. Previously, state law did not mandate a minimum threshold that required hospitals to reduce eligible patients’ costs, although some hospitals had their own financial assistance policies.
In addition to the new standard for financial assistance, the law also holds hospitals accountable for investing in community benefits. The OHA must consider several factors when establishing the new community benefit spending floor, including:
- The community needs identified by the community needs assessment (CHNA);
- Community health improvement plans by regional Coordinated Care Organizations (CCOs);
- Current and historical expenditures on community benefits;
- The overall financial situation of the hospital; and
- The hospital’s spending on social determinants of health.
This requirement would make Oregon the sixth state to require a minimum level of community benefits spending, and the only one to tailor the minimum level for each hospital or health system according to a methodology. Another innovative facet of the law is that it requires the state to consider the needs identified in the CHNA when establishing the spending floor. This represents a step toward holding hospitals accountable for tying their community benefits spending to identified community needs, which is not currently an IRS requirement.
The OHA will convene a workgroup to define the methodology used to determine the minimum spending floors, which will be subject to the rule-making process and take effect in January 2021. The spending floors for each hospital or health system will be made public, and enforcement of the provision will largely rely on public scrutiny.
The Oregon bill had strong support from some key state legislators, including bill sponsor state Rep. Andrea Salinas, who participated in extensive stakeholder engagement leading up to the bill’s passage. Additionally, the bill had the support of the Service Employees International Union (SEIU), a union of hospital and other employees. The success of the bill’s champions put the spotlight on Oregon as the OHA crafts and implements a groundbreaking methodology for establishing the minimum for community benefits spending.
Connecticut is using a different, more specific and short-term approach to increase the effectiveness of community benefits investments. In recent hospital mergers and acquisitions, Connecticut used the certificate of need (CON) process to ensure that community benefit spending addresses community social needs and is directly tied to the CHNA and aligns with the State Health Improvement Plan (SHIP).
In a CON agreement tied to the transfer of assets from Milford Health to Bridgeport Hospital between Yale New Haven Health Services Corp. and Health Quest Systems Inc., the Connecticut Office of Health Strategy (OHS) mandated that the Connecticut hospitals:
- Submit to OHS their CHNAs and CHNA Implementation Strategy, which require input from key community stakeholders, health organizations, and local health departments, as well as the use of data and priorities from the SHIP as a framework for the CHNA.
- Adopt evidence-based interventions detailed in the Centers for Disease Control and Prevention’s 6/18 initiative and provide information about how patient outcomes directly related to the Implementation Strategy will be measured and reported to the community.
- Increase the total dollars spent on community benefits by at least 1 percent every year for the next five years, and ensure that spending and activities directly address the health needs identified by the hospital’s CHNA. The five-year annual 1 percent increase in community benefits spending cannot go towards hospital expenses or include spending on Medicaid, but must be used to address the social determinants of health and the population health needs identified in the CHNA.
The hospital is required to submit documentation to OHS showing “how its community benefit and community building activity expenditures addressed each element identified in the applicable CHNA, with brief narrative explanation of relevant activity for that element, and dollars spent.” These CON requirements require hospitals to show in a public document how they are directly tying community benefit spending to community needs. While CON conditions are time-limited, they demonstrate what is possible when states use their policy levers to maximize community benefits investments. In this way, Connecticut’s CoN work may inform broader state community benefits work beyond the CON process.
Oregon and Connecticut provide examples of how states can go beyond the federal requirements to ensure that hospital community benefit spending is substantial, meets community needs, and addresses state goals in exchange for tax exemptions. To support states in this work, the National Academy for State Health Policy (NASHP) has convened a hospital community benefits workgroup of state officials, supported by the Robert Wood Johnson Foundation and the New England States Consortium Systems Organization. Additional NASHP resources are available in this chart, Hospital Community Benefits Comparison Table for Six New England States, and this infographic, How 10 States Keep the ‘Community’ in Hospitals’ Community Health Needs Assessments.
For information detailing how much specific hospitals invest in community benefits and community building activities, explore this Community Benefit Insight tool.
Support for this work was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the foundation.
Non-profit hospitals are federally required to conduct community health needs assessments (CHNAs) every three years and develop a plan to meet those needs in exchange for their tax exempt status. Many states have laws or guidelines that are more detailed than the federal requirements. Scroll down to see 10 states’ guidelines for involving community members in the CHNA process, as well as their enforcement levers. This infographic draws on state documents, as well as CHNA statutes identified in the Hilltop Institute’s Community Benefit State Law Profiles Comparison.
Print this infographic.
Tax-exempt hospitals receive billions of dollars in tax exemptions each year. In exchange, they are required to invest in the health of their communities. But to do that, hospitals must first identify the health needs of the communities they serve. States can work to make sure hospitals truly seek out and act on meaningful input from a wide range of community representatives — not just community members on a hospital’s board or leaders from one or two high-profile community groups.
State Requirements Can Exceed Federal Standards
To identify community needs, federal legislation requires tax-exempt hospitals to conduct community health needs assessments (CHNAs) every three years, and develop a plan to meet those needs. The US Internal Revenue Service (IRS) requires tax-exempt hospitals to solicit and take into account input from at least one state, local, or tribal public health department as well as from medically underserved, low-income, and minority populations in their communities. It also says that hospitals may solicit input from consumer advocates, community organizations, academics, local governments, school districts, providers, health plans, business, and labor representatives.
Many states have aligned their state CHNA requirements or guidelines with IRS requirements and/or with standards set by the Public Health Accreditation Board (PHAB), which accredits state and local health departments.
Many states also have statutes or guidelines governing the CHNA process that go beyond federal requirements. For example,
- New Hampshire’s statute requires hospitals to consult with service providers and local government officials, as well as many of the same entities that IRS and the PHAB mention;
- A Texas statute requires hospitals to consider consulting with health science centers; and
- Massachusetts voluntary guidelines identify neighborhood associations, schools, churches and clergy, law enforcement, and housing authorities as possible sources of community input.
This state action is significant in light of a 2018 study that found that state CHNA requirements are associated with higher hospital spending on community benefits, and suggesting that state-level community benefits regulations are associated with greater hospital spending on community benefits. See the National Academy for State Health Policy’s How 10 States Keep the ‘Community’ in Hospitals’ Community Health Needs Assessments infographic for examples of 10 states’ statutes and guidance.
Table 1 shows states that address community involvement in the CHNA process either through state statute (California, Maryland, New Hampshire, New York, Rhode Island, and Texas), or through voluntary guidance documents (Maine and Massachusetts).
- Four states (California, New Hampshire, New York, and Rhode Island) statutorily require that certain communities or groups be represented in the CHNA.
- Two states (Maryland and Texas) explain in their statutes that hospitals “may consult with” (Maryland) or “shall consider consulting with” (Texas) certain groups or entities when assessing community needs.
- At least five states (Idaho, Illinois, Indiana, Vermont, Washington State) have state CHNA statutory requirements that do not specify any required representation.
Table 1. Representation Required (or Encouraged*) in the Hospital Community Health Needs Assessment Process
|Any appropriate person||√|
|Health care providers||√||√†||√|
|Health science centers||√|
|Local government officials||√||√||√||√†||√|
|Local health department or public health authority||√||√||√**||√†||√|
|Members of the public||√||√|
|Racial or ethnic minority groups||√||√|
|Disadvantaged populations, including low-income||√||√|
*State statute or guidance recommends but does not require representation in the CHNA process
**New Hampshire established Regional Public Health Networks
†Encouraged in the New York State Prevention Agenda
How States Enforce Community Benefits
While hospitals that fail to meet IRS community health needs assessment requirements may ultimately have their federal tax-exempt status revoked — as happened to a hospital in 2017— states have wide latitude to use other levers to enforce their own community benefits guidelines. Currently, few states codify enforcement levers in their statutes. Among those that don’t, some report success in gaining hospital compliance through transparency measures. For example, many states post hospitals’ community health needs assessments on state websites. An annual press release from the Massachusetts Office of the Attorney General also draws attention to the hospitals’ community benefits reports, which encourages hospitals’ timely compliance.
Table 2. State Statutory Levers for Enforcing Community Benefits
|Violators must provide an explanation||√|
With new governors recently taking office in 20 states in early 2019, states have an opportunity to consider hospital community benefits and community health needs assessment policies as part of a statewide, cross-agency effort to improve health using all the levers at a state’s disposal, including tax policy and enforcement. Meaningful investments in community health are possible when states hold hospitals accountable for keeping the community at the center of community health needs assessments.
The National Academy for State Health Policy convenes a Hospital Community Benefits Workgroup composed primarily of officials from state attorneys general offices and state Medicaid and public health departments. The workgroup is currently exploring how states can develop more meaningful hospital community benefits investments that align with state public health priorities and address the health-related needs of communities.
For more information about this initiative, or to share information on your state’s work in this area, please contact Amy Clary at email@example.com. Thanks to the following states’ officials for their help with these materials: California, Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.
Produced in partnership with the Robert Wood Johnson Foundation and the New England States Consortium Systems Organization.