• Analysis or Summary
  • December 21, 2016

Improving Community Health through Hospital Community Benefit Spending: Charting a Path to Reform

This is CHA’s summary of the following resource.

Report: Improving Community Health through Hospital Community Benefit Spending: Charting a Path to Reform
Source: Milken Institute School of Public Health, The George Washington University 
Date: December 2016
Format: Report
Length: 35 pages


This report covers the issue in three sections – opening with definitions, moving into the hospital’s role in community health and concluding with policy recommendations for the IRS.

The origin and evolution of community benefit, which began for tax-exempt hospitals in 1956 and was initially just defined by providing charity care. In 1969 the IRS replaced the charity care test with a “community benefit” standard, recognizing a broader range of activities that qualified hospitals for tax-exempt status. In 2009 a new reporting system was instituted, the Schedule H, which accompanies Form 990, filed annually by tax-exempt hospital organizations. 

Community Benefit includes: 
  • Financial assistance to patients
  • Shortfalls attributable to Medicaid and other means tested government programs
  • Subsidized health services available to the entire community
  • Research
  • Health professions education and training
  • Community health improvement services, further defined as services “carried out for the express purpose of improving community health” and not services that generate revenue for the institution

Community Building, which falls under Part II of the Schedule H, includes: 
  • Activities that “promote” the health and wellbeing of communities as a whole
  • Physical improvements and housing
  • Economic development
  • Community supports
  • Environmental improvements
The IRS does permit hospitals to report Part II community building activities under Part I community benefits related to community health improvement, but has not given clear guidance on when this is a permissible option.

How the IRS defines community benefit (page 8-15)

Detailed information is provided including examples of the 990 Schedule H form and definitions for key terms: 
  • Financial assistance at cost
  • Medicaid and other means-tested government programs
  • “Other” community benefits
  • Community health improvement services and community benefit operations
  • Health professionals education
  • Subsidized health services
  • Research
  • Cash and in-kind contributions for community benefit

The Growing Role of Hospitals as Community Health Actors (page 16-19)

This section covers the shift in health care from fee-for-service to a more prevention based model, discussing how social determinants of health and a drive to keep people healthier and prevent them from needing health care services. Examples are provided from Trinity Health Initiative, the state of Massachusetts and Dignity Health of non-traditional investments in the community for health care entities.

The section continues with date from a random nationwide sampling of 300 CHNAs and found the top challenges identified were: 

  1. Access to health care
  2. Food environment
  3. Education
  4. Physical activity
  5. Poverty
The top health conditions identified were:
  1. Obesity
  2. Mental health conditions
  3. Diabetes
  4. Substance abuse
  5. Chronic disease

Policy opportunities: strengthening hospitals’ role in improving community health (page 20-26)

This section looks at how the IRS could take action to better align community benefit policy with a larger vision of community-wide health improvement and outlines three specific opportunities:

1. Broaden the definition of community health improvement
“The IRS could eliminate the distinction between community benefit and community building by moving Part II community building activities clearly into Part I community benefit, thereby broadening the definition of community health improvement to clearly encompass activities described in Part II, which improve the health of communities as a whole” 

2. Bring greater transparency to community benefit reporting. 
“The IRS could consider revising the definition of community benefit contained in Part I of Schedule H to add a specific new category of community benefit spending that is linked to hospital CHNA activities including their implementation strategies”

The report goes on to suggest that hospitals report on the percentage of their community benefit spending allocated to community health improvement activities that have been identified on the CHNA. 

3. Establish community-wide health improvement guidance, along with goals and metrics for reallocating community benefit spending toward a broader set of community health improvement activities. 
“The IRS could consider partnering with federal agencies that specialize in programs and activities that help promote community health in order to develop broad guidance for hospitals regarding community building efforts that promote community-wide health.”