Financial Implications of Community Benefit

Additionally, with the update of IRS Form 990, even the federal government is looking for all not-for-profit hospitals to generate community benefit assessments to ensure that they are not only serving the community, but are also truly eligible for their tax benefits. The Patient Protection and Affordable Care Act included several provisions relating to nonprofit hospitals' qualification for federal tax exemption. A new section was created requiring hospitals to meet additional requirements in terms of community health needs, financial assistance, charge limits, and billing and collections.

Hospitals and health systems have been scrutinized by lawmakers, regulators, the media, and community leaders for their charity care practices and other community benefits they provide, and they need be prepared for potential challenges.

According to the Catholic Health Association, which has been helping non-profit hospitals create community benefit assessments for years, all but seven states have reporting requirements: 

• 14 states have mandated reporting (of those, seven only require reporting charity care)
• 20 states (including the District of Columbia) have voluntary reporting
• 10 states have both mandated and voluntary reporting for certain benefits

It is the federal standards set forth in Form 990 that offer some uniformity in what must be reported in terms of expenses and process measurements (e.g., conducting community needs assessments and developing community benefit plans). 

Assigning the resources

When a hospital or health system commits to a community benefit program, it must be sure it is putting the dollars in the right places. Wooton says that the first and perhaps largest of the challenges behind completing a strategic community benefit assessment lies in doing a thorough needs assessment and then prioritizing the needs, not necessarily in reporting the accomplishments of the health system.