Are Non-Profit Hospital Community Benefits Requirements Actually Addressing Community Needs?

Memorial Hermann. Photo: Flickr user Ed Uthman.

When the Affordable Care Act passed, it not only sought to expand the number of insured, but it also created new requirements for tax-exempt hospitals operating as non-profits, including conducting regular community needs assessment and developing a corresponding investment plan. Trouble is, there was no minimum investment required. So though hospitals across the country spent an average of 8.1 percent of expenditures on community health in 2014, according to a new study from Rice University’s Baker Institute, the amounts ranged from 0.96 percent to 18.28 percent depending on the hospital.

Meant to push hospitals to invest in preventative care and population health, community benefit spending tends to focus on “financial assistance to patients,” particularly in Harris County, which has a large uninsured population, rather than on community-level investments.

“[N]onprofit hospitals’ community benefit spending often does not necessarily address broad community needs,” the report concludes.

Community spending generally fits into two categories: patient care or community service, according to the U.S. Internal Revenue Service. Nationwide, the vast majority of hospital’s community health spending goes toward patient care: a full 85 percent, according to the report. While this care is critical, that level of spending, argues the report’s authors, “limits the resources available for broader community health initiatives, such as preventative care or population health.”

And in Texas, that’s especially true. A full 16.6 percent of the state is without health insurance, according to the report, the highest rate in the country. In Harris County, that rate has typically been even higher by about two to three percentage points.

The researchers–Alex Alexander, health policy intern at the Center for Health and Biosciences; Marah Short, associate director of the Center for Health and Biosciences; and Vivian Ho, the James A. Baker III Institute Chair in Health Economics and the director of the Center for Health and Biosciences–looked specifically at how this played out in the Texas Medical Center, the largest medical complex in the world. Since so many of the hospitals there are teaching hospitals, the researchers expected to find a higher than average level of community service spending.

They also looked at for-profit and non-profit hospitals across Harris County, finding that, on average, in 2014, hospitals across the county spent 9.81 percent of total expenditures on community benefit, with variations among individual hospitals. Texas Medical Center hospitals, for example, spent “more than twice as much on community benefit provision as a percentage of total expenditure than non-TMC hospitals,” according to the report.

Generally speaking, TMC hospitals also spent more on research and health professions education than non-TMC hospitals and less on community health improvement services and costs associated with means-tested government programs excluding Medicaid. Compared to national averages, TMC hospitals spent significantly more of community benefit expenditures on so-called charity care: 41.7 percent compared to 25 percent nationally.

And overall, over 80 percent “of that community benefit spending goes toward charity care, unreimbursed costs of means-tested government programs, health professions education, and research,” at TMC hospitals, according to the report.

The report also found that individual hospital plans varied greatly. So while Memorial Hermann, for example, provided specific dollar amounts attached to its goals, “other provide only vague goals.”

To encourage more community service spending, the report argues the IRS could tweak its definition of community benefit to include more general community improvements, like safe, affordable housing. “Combining this strategy with clearly defined minimum requirements for certain categories, such as subsidized health services or community health improvement,” the report continues, “could further increase the breadth of the impact of a hospital’s community benefit expenditures.”

Print Friendly, PDF & Email

Leah Binkovitz

Leah Binkovitz is Senior Editor with the Kinder Institute for Urban Research.

Leave a Reply

Your email address will not be published. Required fields are marked *