Over half of community hospitals in the United States are private, nonprofit organizations which receive tax-exempt status in exchange for providing community benefit. Ideally, these services and activities positively influence the health and wellbeing of a hospital’s community. However, lack of clarity regarding what counts as community benefit, and limited transparency of community benefit reporting data make it difficult to assess whether hospitals are fulfilling their duty of serving their communities.

In 2012, the Affordable Care Act (ACA) set provisions to increase transparency of hospitals’ community benefit spending. This gave the IRS and Congress increased oversight and required hospitals to develop health needs assessments/implementation plans and publicly post written financial assistance practices. In late 2020, the U.S. Government Accountability Office (GAO) released a report detailing opportunities for the federal government and the IRS to improve oversight of hospitals’ community benefit activities. Community Catalyst staff were among the stakeholders interviewed by GAO staff for this report, which calls on Congress to specify community benefit standards and recommends the IRS take steps to improve transparency of hospitals’ community benefit data.

Establishing Transparent Community Benefit Standards

There is often confusion about what activities count towards fulfilment of community benefit. The IRS uses two methods to monitor tax-exempt hospitals’ compliance with community benefit standards: (1) annual tax forms – Form 990 and Schedule H, and (2) reviews of hospitals’ community benefit activities every three years. The Schedule H information reported is available on Community Benefit Insight (CBI), a site that compiles this data in an easily digestible way with visualizations of community benefit spending over the years. This includes data from 2010 and CBI is currently in the process of uploading 2018 data.

Filing requirements enable hospitals that are part of multi-hospital health systems to report Schedule H details in the aggregate rather than by individual hospital facility. This often creates challenges for the community to easily understand contributions made by an individual hospital.

While thousands of hospitals have been referred to an audit for potential noncompliance with ACA requirements, due to a lack of clarity, the IRS does not have a method to codify reviews specifically for community benefit compliance. Reported community benefit spending is often dependent on the respondent’s interpretation. The GAO report calls for Congress to specifically outline activities that would qualify as community benefit and for the IRS to codify methods to document community benefit compliance.

Tackling Medical Debt Through Accessible Financial Assistance

One of the clearer examples of community benefit includes charity care. Charity care (or financial assistance) may be provided in the form of free or discounted care for those unable to pay. However, we’ve seen headlines across the country that reveal the detrimental effects when hospitals may not be working with patients to check eligibility for financial assistance. Rather than working with individuals to navigate complex financial assistance policies, many are sent a medical bill and left on their own to find a resolution.

Kaiser Health News reported that nearly half of non-profit hospitals are routinely billing patients who would be eligible for charity care. The article highlights the story of Ashley Pintos who went for emergency care at St. Joseph Medical Center in Tacoma, Washington, and ended up with an $839 bill. Pintos inability to pay caused the bill to go to collections with a high interest rate and, as a result, damaged her credit history. St. Joseph Medical Center is one of multiple facilities operated by Franciscan Health System. According to CBI data, Franciscan Health reported $14 million in charity care for four facilities it operates; it is unclear how each individual facility is contributing towards this total. Although the expectation is for all hospitals to provide direct benefits, a threshold for minimum contributions is undefined. Community investments could be concentrated in one geographic area, while another community may be left neglected.

Sage Growth Partners reported one-third of non-profit hospitals with more than $10 million in bad debt. Bad debt is not classified as financial assistance; it occurs when the hospital anticipates payment for services, is unable to collect payment, and absorbs the costs. Unfortunately, this may have led up to a hospital already exhausting collective measures. These situations could have been avoided with more transparent financial assistance practices. An MLK50-ProPublica investigation revealed “aggressive collection practices” Methodist Le Bonhuer Healthcare was conducting on low-income patients. CBI 2018 data shows Methodist Healthcare reported $43 million attributed to bad debt with 50% of that total related to patients who would have been eligible for financial assistance. However, enforcement of financial assistance practices is not strictly monitored. For example, the GAO’s analysis found there were still only 62% of tax-exempt hospitals in 2016 that “maintain a financial assistance policy.”

Engaging Communities to Drive Health Needs

The ACA requires tax-exempt hospitals to conduct a Community Health Needs Assessment (CHNA) every three years; it provides hospitals with the opportunity to work in tandem with community partners to identify the most significant health needs in the community. While the intention is for community residents to voice their health concerns, hospitals vary in their approach, which may result in communities feeling neglected. The CHNA must solicit input from certain stakeholders though the development of the community health improvement or implementation plan, at the discretion of the hospital. Engaging community partners throughout the process, from assessing needs to developing an implementation plan, is integral to achieving a healthy community. Community partners can provide insight in often neglected areas such as social determinants of health – access to food, affordable housing or education – areas in which hospitals may be able to play a role to influence health outcomes and fulfill community benefit requirements.

Community Catalyst just launched the Community Benefit & Economic Stability Project which seeks to work with hospitals to ensure they have transparent and accessible financial assistance policies, and that their billing and collection policies do not exacerbate existing inequities. Our health policy minute video explains how, through partnering with consumer-advocacy organizations, we intend to leverage community benefit requirements to advance consumer-driven, financial strengthening policies. Additionally, Community Catalyst created a dashboard to gain insight and unfold opportunities to address the root causes with communities impacted by health injustice.  Community engagement will be crucial to help implement the GAO’s recommendations. We encourage consumers and health advocacy organizations to utilize available CBI data to engage with health care systems and address potential gaps in fulfilling community benefit activities.