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Dr. Pamela Banister poses while working at a clinic which is part of the Singing River Health System in Pascagoula, Mississippi September 26, 2013. The not-for-profit hospital system offers a menu of services that all cost $49, from school physicals to treatments for sinus infections and rashes. On bigger-ticket items, the hospital offers a 40 percent discount to patients who can pay cash at the time of service. Despite the clinic offering discounts for treatments paid in cash, many in the area still cannot afford the tests they need or visits with a specialist.
 As Americans across the nation begin to find out what Obamacare has in store for them, many of Mississippi's most needy will find out the answer is nothing, since the state decided not to expand the Medicaid program for the poor under President Barack Obama's Affordable Care Act. Picture taken September 26. To match Feature USA-HEALTHCARE/MISSISSIPPI        REUTERS/Lyle Ratliff  (UNITED STATES - Tags: HEALTH BUSINESS SOCIETY POVERTY) - RTR3FKXL

Hospitals as community hubs: Integrating community benefit spending, community health needs assessment, and community health improvement

Much public focus is being given to a broader role for hospitals in improving the health of their communities. This focus parallels a growing interest in addressing the social determinants of health as well as health care policy reforms designed to increase the efficiency and quality of care while improving health outcomes.

This interest in the community role of hospitals has drawn attention to the federal legal standards and requirements for nonprofit hospitals seeking federal tax exemption. Tax-exempt hospitals are required to provide community benefits. And while financial assistance to patients unable to pay for care is a basic requirement of tax-exemption, IRS guidelines define the concept of community benefit to include a range of community health improvement efforts.

At the same time, the IRS draws a distinction between community health improvement spending–which it automatically considers a community benefit–and certain “community-building” activities where additional information is required in order to be compliant with IRS rules. In addition, community benefit obligations are included in the Affordable Care Act (ACA).

Specifically, the ACA requires nonprofit hospitals periodically to complete a community health needs assessment (CHNA), which means the hospital must conduct a review of health conditions in its community and develop a plan to address concerns. While these requirements are causing hospitals to look more closely at their role in the community, challenges remain. For instance, complex language in the rules can mean hospitals are unclear what activities and expenditures count as a “community benefit.” Hospitals must take additional steps in order to report community building as community health improvement.

These policies can discourage creative approaches. Moreover, transparency rules and competing hospital priorities can also weaken hospital-community partnerships.
To encourage more effective partnerships in community investments by nonprofit hospitals:

  • The IRS needs to clarify the relationship between community spending and the requirements of the CHNA.
  • There needs to be greater transparency in the implementation strategy phase of the CHNA.
  • The IRS needs to broaden the definition of community health improvement to encourage innovation and upstream investment by hospitals.

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