Experts anticipate IRS community benefit reporting guidelines

July 1, 2011


ATLANTA — Two CHA staff members, both of whom have worked closely with the Senate Finance Committee and the Internal Revenue Service as new requirements for tax-exempt hospitals were developed, are urging hospitals to strive to comply with the spirit and letter of the law while awaiting further guidance from the IRS and CHA.

CHA staff members Julie Trocchio, senior director, community benefit and continuing care, and Lisa Gilden, vice president, general counsel, were joined in an assembly break-out session by Sr. Dorothy Thum, RSM. Sr. Thum provided an in-depth look at the way her hospital conducts a community health needs assessment, thus fulfilling a key requirement of the new law.

Sr. Thum is senior vice president, mission and values integration for Mercy health system, Toledo, Ohio. The new requirements, part of the Patient Protection and Affordable Care Act, will have a significant impact on many CHA members and their patients, affecting billing and collection, financial assistance policies and how community benefit programs are planned and carried out, Trocchio said.

Requirements related to billing and collection practices and financial assistance policies are already effective — in place for tax years beginning after March 23, 2010, Gilden noted. However, effective dates for provisions related to community needs assessments are later. The first community health needs assessments must be completed, in the case of most systems, during 2013, depending on when a hospital's fiscal year begins.

"The statute contains a number of undefined terms and open questions," Gilden said. "We are still hoping for more clarification and guidance from the IRS." The IRS has told CHA that a notice about the requirements will be released this summer, with a comment period followed by proposed rules and then final rules.

By the 2013 date, hospitals will be required to have completed a community needs assessment and adopted a community benefits strategy reflecting how they will respond to the identified needs. They will be required to report to the IRS what needs they are addressing, the process used to set priorities, and explain why some needs are not being addressed — for example, if the hospital lacks the resources to meet them.

CHA has prepared a preliminary guide to assist hospitals in improving their community benefit assessments and plans and in assuring compliance with the new requirements. "Assessing and Addressing Community Health Needs" is available now as a discussion draft PDF and will be printed as soon as the IRS provides additional guidance, Trocchio said.

Until clarifications are issued, "we suggest you comply with the specifics of the law as best you can," Gilden said. Penalties for noncompliance range from a $50,000 excise tax for failure to conduct a needs assessment to loss of tax-exempt status.

"It is impossible to know how the new law will play out" in the long-term, Gilden said. However, Trocchio noted, "We are not viewing this as a 'gotcha' thing," aimed at removing tax-exempt status, but rather as instructions "to make sure that hospitals are doing community needs assessments, developing their implementation strategy and using good practices in the areas of financial assistance, billing and collections."

The most challenging part of the law in regard to community benefit programs is ensuring that the assessment results in a plan to improve a community's health, Trocchio said. But, she added, the Catholic health ministry has excellent examples of where this is being done, including at Mercy in Toledo.

Sr. Thum reported that Mercy is in the process of completing its third community health needs assessment, a task it approached as a regional effort and conducted in collaboration with numerous partners. The effort puts the hospital in good stead for meeting the new IRS requirements. The first assessment began when hospital administrators and others in the northern Ohio region realized many services were being duplicated while some needs remained unmet.

Trocchio said Mercy's approach demonstrates "not only what the legislation requires, but what the law might look like in action."

In assessing needs and planning its community benefit programs, Mercy has partnered with other area hospitals, academic institutions, public health experts, local health departments, elected and law enforcement officials, school systems, religious organizations and community agencies, including United Way. "This is definitely a team sport," Sr. Thum said. She advised bringing experts in data and communications into the process, as well as the ER staff and others "on the front lines who know the community's health needs."

Community forums are key to the process as well, she said. "You have to know that the problems you are addressing resonate with the people affected by them."

Documenting the process and making it public will be critical for compliance with the new law, Sr. Thum noted. She also urged that hospitals and health systems keep a record of the process that leads to setting community benefit priorities. This will be important for provisions that require a hospital to relate its programs to the needs assessment, to show how those programs are addressing identified needs, and to describe any needs not being addressed, along with reasons for not addressing them.

"We are being called to a higher standard," Sr. Thum said. "I invite you to put your heart into it."

Resources available at the CHA website include a comprehensive PowerPoint presentation for the session, with a detailed look at components of the new regulations, and the new CHA resource for assessing and addressing community need. Also on the website are examples of community assessments and plans, and public health and other tools and resources for complying with the new law. A copy of Mercy's most recently published community health needs assessment, from 2007, can be downloaded as a PDF file.


Copyright © 2011 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.

Copyright © 2011 by the Catholic Health Association of the United States

For reprint permission, contact Betty Crosby or call (314) 253-3490.