1. Community Benefits and Schedule H Community Health Needs Assessment and What Counts American Public Health Association Annual Meeting November 6, 2013 Martha Somerville, JD, MPH Somerville Consulting

2. Presenter Disclosure Statement Martha H Somerville 2 The following personal financial relationships with commercial interests relevant to this presentation existed during the past 12 months: No relationships to disclose

3. Presentation Overview  Background: Community Benefits and Schedule H  ACA Community Health Needs Assessment (CHNA) Requirement & IRS Notice of Public Rulemaking (NPRM)  What “Counts” as Community Benefit  What Community Benefits Hospitals Report  Looking Ahead 3

4. 4 Background

5. Hospital Community Benefits What?  Nonprofit, tax-exempt hospitals providing: —Free, discounted, subsidized, and under-reimbursed care (shorthand: “charity care and Medicaid shortfall”) —Health professional education, research —Activities/programs to improve health in the community Why?  The hospital’s charitable mission  Tax exemption 5

6. Nonprofit Hospital Tax Exemption $12.6 Billion 6 http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7695/12-06-nonprofit.pdf; https://www.jct.gov/publications.html?func=startdown&id=1481

7. Basis of the Exemption  IRC §501(c)(3): “corporations organized and operated exclusively for... charitable [purposes]”  “Charitable purposes” = free & below-cost hospital care  1969: IRS Rev. Rul. 69-545: “Community benefit standard: Tax exemption also may be supported by hospital activities that improve health in the community served  Federal: no specific threshold amount of community benefits to qualify for tax exemption: IRS “facts and circumstances” test 7

8.  IRS makes reporting more rigorous: — Redesign of Form 990 informational return for tax-exempt organizations —New Form 990 Schedule H for tax- exempt hospital community benefit reporting (optional for 2008) -8- Community Benefit Accountability (2007)

9. -9-

10. March 23, 2010 Affordable Care Act (ACA) § 9007 IRC § 501(r) 10  Financial assistance policies  Limitations on hospital charges  Billing and collection limitations  Community health needs assessment (CHNA) & implementation strategy—for each hospital facility—at least every 3 years

11. The ACA’s CHNA Requirement A hospital’s CHNA that satisfies § 501(r): ‘‘(i) takes into account input from persons who represent the broad interests of the community served … including those with special knowledge of or expertise in public health, and (ii) is made widely available to the public.” ACA §9007 (I.R.C. §501(r)) 11

12. 12 April 2013 Notice of Public Rulemaking (Proposed CHNA Regulations) IRS Proposed CHNA Regulations

13. NPRM Recurrent Themes 13  Hospital flexibility v. community empowerment  Inclusiveness: focus on vulnerable populations  Collaboration: State & local public health = “experts”  Transparency 78:66 F. Reg. 20532-20544 (April 5, 2013)

14. April 2013: IRS/Treasury NPRM CHNA Proposed Regulations 14 Recurrent themes: —Hospital flexibility v. community empowerment —Inclusiveness: focus on vulnerable populations —Collaboration: State & local public health = “experts” —Transparency 78:66 F. Reg. 20532-20544 (April 5, 2013)

15. NPRM Proposed CHNA Requirements Each hospital facility’s CHNA must: 1.Define the community served 2.Assess & prioritize the community’s health needs, taking into account community & expert input 3.Written CHNA report made widely available to the public 4.Implementation strategy -15-

16. NPRM: Community & Expert Input §1.501(r)-3(b)(5) (proposed) Must take into account input from:  At least one state, local, tribal, or regional health department  Medically underserved, low income, and minority populations  Written comments on previous cycle CHNA and implementation strategy 16

17. NPRM: Assessment Process §1.501(r)-3(b)(4) (proposed)  Determine the community’s significant health needs  Prioritize those health needs  Identify potential measures and resources available to address those health needs 17

18. §1.501(r)-3(b)(4) (proposed)  Significance—all the facts and circumstances  Prioritization—hospital may use ANY criteria; may consider: —Burden, scope, severity, urgency of the need —Feasibility of addressing the need —Association of the need with health disparities —Importance to the community of addressing the need 18 NPRM Assessment: What Needs are “Significant?” How to “Prioritize?”

19. §1.501(r)-3(b)(1) & (7); (proposed); NPRM Preamble, 78:66 F. Reg. 20532 19 NPRM: CHNA Report  Document CHNA findings in a written report & make it widely available to the public: —Community definition, how the community was identified —CHNA process & methods, community input —A prioritized description of significant needs —A description of the process and criteria used to determine significance and priority

20. NPRM: Implementation Strategy (Community Benefit Plan) §1.501(r)-3(c)(2) (proposed)  For each significant need identified: —Describe actions the hospital will take to address the need and the anticipated impact OR —Explain why the need will not be addressed 20

21. § 1.501(r)(c)(2); 1.6033-2(a)(2)(ii)(I)(2) (proposed) 21 NPRM: Implementation Strategy (cont’d)  For each significant need identified: —Include a plan to evaluate initiative’s impact —Identify programs & resources hospital will commit to addressing the need —Describe planned collaboration to address the need  Either make the implementation strategy available on the hospital’s website OR attach to 990

22. Reporting CHNA on Schedule H 22

23. 23 Reporting CHNA: Schedule H, Part V Checkboxes 

24. 1. During the tax year or either of the two immediately preceding tax years, did the hospital facility conduct a community health needs assessment (CHNA)? If “No,” skip to line 9.............. If “Yes,” indicate what the CHNA report describes (check all that apply): a.  A definition of the community served by the hospital facility … *** i.  Other (describe in part VI)  24 Reporting CHNA: Schedule H, Part V: Checkboxes

25. Schedule H: Part VI: Exposition 25

26. Reporting Community Benefits Provided on Schedule H 26

27. The Numbers: Reporting Community Benefits at Cost Form 990, Schedule H Part I, Line 7 27

28. 28 Reporting Community Benefits Schedule H Part I, Line 7 7a-d Financial assistance and means-tested government programs (e.g., Medicaid shortfall) eCommunity health improvement services and community benefit operations fHealth professions education gSubsidized health services hResearch iCash & in-kind contributions for community benefit

29. Part I, Line 7e Community Health Improvement Services 2012 Schedule H Instructions for Worksheet 4, pp. 15-17;. 29  Hospital-subsidized activities or programs, “for the express purpose of improving community health” —Don’t generate patient bills (nominal/sliding scale fee OK) —Not for a marketing purpose

30. Part II: Community Building

31. Part I, Line 7e Community Health Improvement Services 2012 Schedule H Instructions for Worksheet 4, pp. 15-17; 2012 Instructions for Part II, Community Building, p. 4. 31 Include in Part I (Community Benefits): “Community building” activities (otherwise reportable in Part II) that meet the criteria for community health improvement services

32. 2012 Schedule H Instructions, Worksheet 4, pp. 15-17. 32  Community need must be established —CHNA —Request from public health agency or community group —Involvement of unrelated, collaborative tax- exempt or government organizations as partners Part I, Line 7e Community Health Improvement Services Criterion #1

33. 2012 Schedule H Instructions, Worksheet 4, pp. 15-17.  The activity seeks to achieve a community objective —Improving access to health services —Enhancing public health —Advancing increased general knowledge —Relief of a government burden to improve health 33 Part I, Line 7e Community Health Improvement Services Criterion #2

34. What Hospitals Report 34

35. 35 Community Benefits Reported in 2009 Based on Young, G., et al. (2013) Provision of community benefit by tax-exempt U.S. Hospitals. N. Engl J Med. 368: 16

36. 36 Relative Impacts of Health Determinants Compared to 2009 Hospital-reported Community Benefits Based on: UWPHI County Health Rankings & Roadmaps Ranking Methods: Health Factor Weights for the 2013 Health Rankings Young, G., et al. (2013) Provision of community benefit by tax- exempt U.S. Hospitals. N. Engl J Med. 368: 16

37. Looking Ahead 37

38. 38 2014  ACA health coverage fully implemented  Fewer uninsured  Can/will hospitals shift some of their community benefit investments from the provision of free care/financial assistance to community health improvement services?

39. 39 Community Health Improvement Services Moving From Sick Care to Health Care

40.  Somerville, M., Nelson, G., Mueller, C. & Boddie-Willis, C. Hospital Community Benefits after the ACA: Present Posture, Future Challenges http://www.hilltopinstitute.org/publications/HospitalCommunityBenefitsAfterTheACA-PresentFutureIssueBrief8- October2013.pdf  Barnett, K. & Somerville, M. Hospital Community Benefits after the ACA: Schedule H and Hospital Community Benefit—Opportunities and Challenges for the States http://www.hilltopinstitute.org/publications/HospitalCommunityBenefitsAfterTheACA- ScheduleHIssueBrief4-October2012.pdf  Somerville, M., Nelson, G., Mueller, C., Boddie-Willis, C., & Folkemer, D. Hospital community benefits after the ACA: Community building and the root causes of poor health. http://www.hilltopinstitute.org/publications/HospitalCommunityBenefitsAfterTheACAScheduleHIssueBrief5- October2012.pdf Disclaimer The information in this presentation is provided for informational purposes only. It is not intended as and should not be considered legal or tax advice. Neither Somerville Consulting nor Martha Somerville enter into attorney‐client relationships. 40 Related Publications