In a highly energetic session Tuesday afternoon, Keith Hearle of Verite Consulting and Donna Shelton of NACHRI presented an update on community benefit regulations and reporting -- specifically the IRS Form 990H; placed the current challenges in their historical context; shared results from the recently-released NACHRI Children's Hospital Community Benefit Survey Report, available to members on the NACHRI Web site; and looked at strategies and resources for the future. A lively discussion followed the presentation.
Hospitals represent approximately 40 percent of the expense of the whole non-profit universe, so there is significant reason for the IRS to focus specifically on hospitals. In 990H, H is for hospitals.
In the last few months, a lot of new information has come down the pike. In December 2008, Catholic Health Association released the new version of their Guide to Planning and Reporting Community Benefit, which incorporates a lot of recommendations from NACHRI related specifically to community benefit and children's hospitals. In February 2009, the IRS published their hospital compliance project final report; one complication is that their guidelines break down across many different hospital types, but they created their own breakdown, not using anyone else's categorizations. Earlier this month, the IRS began work on instructions for tax year 2009 filing. Now that 2009 instructions are on the table, there are several issues that will need to be worked out, including:
- Reporting programs that address well accepted community/public health needs (e.g. smoking cessation, obesity, etc...)
- Reporting "community building" programs that target specific health outcomes as "community benefit"
- Treatment of direct and indirect CHGME revenue -- do we need to offset this "grant revenue" (a NACHRI conference call will deal with this issue soon)
- How do we clarify "organization" vs. "hospital" vs. "facility" in the guidelines
- How do we convert bad debt to cost -- the current form is technically inaccurate, so this needs revision
Implications of the current climate
The risks have not abated around children's hospitals' tax-exempt status. If we are serious about health reform, this will likely make a bigger difference to the amount of charity care we provide and report. This is accompanied by continued calls for transparency. Federal, state and local budget deficits are also an issue -- public officials are trying to find extra money, and so they will be looking for any way to get money. Also, many policy makers don't understand children's hospitals and the issues that exist. This is especially true of specialty hospitals -- which don't have emergency departments and traditional charity care.
There is no data out now that provides a true apples-to-apples comparison for hospitals community benefit. Also, grants are a pretty big issue -- research institutions have a huge pass-through for research grants, because research dollars don't usually produce revenue, but do add dollars to the bottom line. The result is that something like a 5 percent community benefit standard ends up taking into account that additioanl dollars from the research pass-through, which makes the 5 percent standard even harder to hit -- despite the fact that research will theoretically provide long-term benefit to health care. Finally, attendees looked at questions of how uncompensated vs. undercompensated care work themselves out.
NACHRI and N.A.C.H. response
- Regulatory challenges -- NACHRI has continued to engage with Congressional and IRS staff. Shelton included a request to attendees for their hospitals to respond quickly to any NACHRI requests for community benefit-specific information; limited turnaround time when issues come up on the legislative calendar require immediate hospital response to incorporate the children's hospital perspective into legislation.)
- Reporting challenges -- NACHRI is engaging with CHA, CHCA, member resources and education, and Schedule H annotation. Community Benefit FOCUS Group worked out a lot of additional guidelines for research and education, and worked with CHA and affect the guidelines that came out from CHA in Dec. 2008. Also, as part of FOCUS Group, NACHRI surveyed members and worked with Hearle developed a 33-page annotated schedule H form that goes line by line to help hospitals feature their reporting in the best light possible, and in a way consistent among hospitals. NACHRI Webinars have also been logged on the NACHRI Web site and provide a lot of additional context.
- Organizational challenges -- Talking points from the member survey report are on the NACHRI Web site on the community benefit page. Survey findings show that children's hospitals have strengths on which to build. Prevention and health focus is also beneficial, as are established community relationships. Some of the challenges include chilren's hospital within hospital facilities that often rely on affiliated entities for community benefit program leadership -- this will make it hard for hosptial within hospital facilities to present themselves in the best light. In another challenge, sometimes community outreach efforts are housed under a hospital's marketing role instead of under a more focused commuinity benefit or advocacy role, which could hurt their weight in reporting; a community effort is a stronger benefit if it is focused on community rather than centered on bolstering the hospital's community image. Finally, few hospitals have direct board involvement in community benefit reporting; few places have a budget that is specified for community benefit; fewer hospitals do needs assessments than was expected; and many have Inconsistent (sometimes invisible) reporting.
Future NACHRI/N.A.C.H. initiatives
- Continued partnership with other organizations, including CHA, CHCA, AHA, AAMC, Verite Healthcare Consulting
- 990 pre-filing/concurrent review provided for hospitals, as well as a seminar on "what counts" as hospitals are reviewing their own records for community benefit
- Economic impact analyses -- we think it is important to include that children's hospitals are not just offering community benefit, but are employers that affect community
- NACHRI plans to publish an Association-wide community benefit report sometime in the future
- Continue member education and clarificiation through as many different venues as possible
Hearle's immediate recommendations for hospitals
- Develop Tax Year 2008 Schedule H Filing Strategy - file it if you have it ready, but if you don't have it ready, fill out parts V and VI (essay questions) so that you have on record the context -- your story -- for the mandatory component. There are some risks in only doing the minimal filing for the first year.
- Assure that community needs have been assessed
- Inventory community benefit programs, and make sure that programs meet the "what counts" criteria -- cast a wide net of what you are doing and then filter it down to what you can actually report, and make sure that programs are more community benefit than they are marketing. Often there are community benefit dollars floating
- Establish or organize public-health oriented programs that involve evidence-based interventions.
- Develop community benefit infrastructure, which may include a permanent board committee that might address these issues (or at least make sure it is clearly assigned to a standing committee so it doesn't get overlooked)
- Develop bulletproof charity care and collections policies. Some more work will be coming down the pipe soon to add clarity
- Integrate community benefit/needs assessment into strategic plans. Write your strategic plans with a specific look at community benefit so that it is integrated into the strategy discussion for the hospital
- Build community benefit into routine management reporting and dashboards -- find a way to keep this in front of your staff and supporters
- Tell the story -- You want community benefit to be in every press release. Showcase the community service component of what you are already doing.
Big picture advice
Hearle had this final word: "You all have a good story to tell. it is just going to be a lot of work to pull it all together and share it with stakeholders, including the IRS."
One of the audience members had this exhortation:
"Do it not because this is compliance, but because this is what we do: we benefit the community. Let's tell our story. Pat yourself on the back."
Questions for discussion
- What kind of additioanl support can NACHRI offer for members?
- Would hospitals use a wiki to share community benefit strategies, policies and procedures?
- Where does community benefit responsibility live within your hospitals?
- How do you find community benefit within your hospitals, and what unexpected places have housed community benefit?
