AHA: New IRS Method Doesn't Show True Costs of Charity Care

Another issue highlighted by the Institute's report is the way Schedule H calculates hospitals' contributions to community building for physical improvements in the neighborhood, economic development, workforce development. Schedule H asks for this information on the second page, which means that it is not counted in the numerator of the calculation of community benefit expense as a percent of total expenses.

Requiring this information on the second page " has a doubly negative effect," the Institute report said because "engaging in community development activities, as many [hospital] systems do, will actually have the effect of reducing the percent of their expenses that are reported for community benefit."

In the letter to Shulman, Hatton said she thinks there are ways to fix Schedule H so that those community benefits provided system-wide, which now don't accrue to individual hospitals in the system, are accurately reflected.

"We believe that flaws described in the [Urban Institute] study can be remedied to improve [Schedule H] reliability and, hence, public confidence in it as a more accurate reporting tool on community benefit," she wrote.