A new Health Affairs blog post provides a potential blueprint for non-profit hospitals looking to comply with federal regulations regarding community benefits and their tax exemptions.
Written by Sara Rosenbaum, a professor at the George Washington University School of Public Health and Bechara Choucair, former Chicago Health Commissioner and now an executive with the Michigan-based hospital system Trinity Health, the article first delves into the potential pitfalls non-profit hospitals can encounter when reporting community benefits to the Internal Revenue Service (IRS).
There has been an enormous amount of debate regarding hospital community benefits, with some in the provider community pushing for the expansion of the definition to include housing and other services. The current tax exemption for non-profit hospitals nationwide approach $25 billion in 2011, doubling in less than a decade. In turn, that has led to more scrutiny from the IRS regarding how benefits are calculated and reported.
"IRS policy does permit hospitals to allocate community building expenditures to community benefit activities and thus realize credit for these activities. In order to do so, however, hospitals need to be able to separately justify such expenditures as ones that promote community health," the authors wrote. "The justification process is unclear, nor do Schedule H reporting instructions specify the standard of review that the agency will use."
The article did note that the term 'improving community health' could be broad enough to encompass activities that do not involve healthcare but that lead to health improvement on a community-wide basis.
As an example of a sound community benefits program, the article cited Trinity Health's approach. They noted that Trinity "is focusing on community health and well-being as a way to empower low-income, disadvantaged, and underserved populations and communities." Of particular focus is both adult and childhood obesity, smoking cessation and other determinants that "affect current and future health outcomes."
According to the authors, "achieving these goals rests on three pillars comprised of clinical services through the Trinity Health system for those living in poverty, community engagement through wraparound services focusing on poor and vulnerable populations, and of particular relevance to this post, community transformation focusing on the built environment, economic revitalization, and other social determinants of health.
To learn more:
- read the Health Affairs blog post