Community Benefit Connect–Compliance

There are resources available to assist tax exempt hospitals achieve compliance with state and federal requirements for community benefit.

This slide presentation can be used to outline community benefit requirements to a variety of internal and external stakeholders.

pdficon50x64 What is Community Benefit

Federal Regulations

The Affordable Care Act (ACA), enacted in 2010, sets forth requirements for nonprofit hospitals under § 501(r) of the Internal Revenue Code. There are a number of regulations for tax-exempt hospitals, which include requirements for hospitals to:

  • Conduct a Community Health Needs Assessment (CHNA) every three years, identify significant health needs, and develop an Implementation Strategy to address the needs identified by the CHNA.
  • Establish written financial assistance and emergency medical care policies.
  • Limit the amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital’s financial assistance policy (FAP).
  • Make reasonable efforts to determine an individual’s eligibility for assistance under the hospital’s financial assistance policy before engaging in extraordinary collection actions against the individual.

Tax exempt hospitals are required to annually report the IRS financial data and respond to questions that track compliance with the 501(r) rules on Form 990 Schedule H.

IRS About Form 990 Schedule H

IRS Form 990 Schedule H Instructions for 2020

IRS Issues Final Rules, December 31, 2014

On December 29, 2014, the IRS issued the final rules that provide guidance to nonprofit hospitals.  The rules can be found in the Federal Register.

IRS Reports to Congress on Hospital Community Benefit

January 2015 – The IRS, in consultation with the Department of Health and Human Services, completed a report on the activities of tax-exempt and other hospitals. As a requirement of the Affordable Care Act, the IRS and HHS must submit an annual report to congressional committees on the community benefit contributions reported on Form 990, Schedule H.

The report is for data from the 2011 Tax Year and shows community benefit was 9.67% of total hospital expenses. Community benefit categories that were counted include charity care, unreimbursed costs of Medicaid, community health improvement, research, subsidized services, health professions education, cash and in-kind donations, and community benefit operations.

  • 5.42% of community benefit expenses were for charity care and Medicaid shortfall.
  • 4.24% of community benefit expenses were for the other community benefit categories.

View the report:  IRS Report to Congress on Community Benefit Contributions

June 2016 – The IRS completed its annual Report to Congress on Private Tax-Exempt, Taxable and Government Owned Hospitals. The IRS reported 2,482 compliance reviews of charitable hospitals completed between 2014 and 2016. From this review, 163 hospitals were slated for further examination.

May 2018 – The IRS Report to Congress on Private Tax-Exempt, Taxable and Government Owned Hospitals contains information on compliance with the Affordable Care Act (section 9007) for 2014

Policy Brief from Health Affairs (February 25, 2016)
Summary of community benefit regulations and issues presented in an easy-to-read policy brief.

View the policy brief: Nonprofit Hospitals’ Community Benefit Requirements

U.S. Government Accounting Office Report to Congress (September 17, 2020)

GAO was asked to review IRS’s implementation of requirements for tax-exempt hospitals. This report assesses IRS’s (1) oversight of how tax-exempt hospitals provide community benefits, and (2) enforcement of PPACA requirements related to tax-exempt hospitals. View the entire report: U.S. Government Accounting Office Report to Congress

State Regulations

In addition to federal community benefit standards, some states also have requirements for hospitals located within the state to maintain state tax exemption. While there may be similarities in federal and state requirements, the regulations may not align. State regulations may be more or less rigorous than the Federal requirements.

In 2015, 25 states had requirements for community benefit (Woodcock, C.H, & Nelson, G.D., June 2015, The Hilltop Institute, Issue Brief).

Community Benefit State Law Profiles – The Hilltop Institute

National Academy for State Health Policy

Hospital Community Benefit Comparison Table for Six Northeastern States [CT, ME, MA, NH, RI, VT] (May, 2018)

State Requirements or Guidelines for Community Involvement in Community Health Needs Assessments [CA, ME, MA, MD, NH, NY, RI, TX, VT, WA] (April 2019)

Washington (E2SHB 1272 November 2021) New hospital reporting requirements that include submitting information on community health improvement services, CHNAs, and financial reporting. Different compliance dates are outlined in the regulations.

Oregon (effective 2021) Each tax-exempt hospital or hospital system in the state will receive a floor for community benefit spending based on their revenues, prior expenditures, financial health, and the needs of the population served.

California  (effective January 1, 2020)

Colorado (passed May 16, 2019)

Georgia (effective October 1, 2019)

Massachusetts (adopted February 7, 2018)

Let Community Benefit Connect know if there have been changes to your state’s community benefit laws.

Hospital Community Benefit after the ACA: The State Law Landscape. The Hilltop Institute, Issue Brief.

Tracking and Reporting Community Benefit

The Federal Government and 25 states require reporting of community benefit activities with associated financial valuation.

IRS Regulations and Form 990 Schedule H and Instructions – IRS

IRS Form 990 Schedule H Instructions for 2020

What Counts as Community Benefit – Catholic Health Association of the United States