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Is Non-Profit Hospital Community Benefit Equally Distributed Across States?


May 8th, 2014

Editor’s note: In addition to David Kindig, this post is also coauthored by Erik Bakken.

In a recent Health Affairs Blog post, Sara Rosenbaum, Amber Rieke, and Maureen Byrnes discuss how IRS Community Benefit expenditures might be better directed to community building and community health improvement activities instead of primarily being reported as unreimbursed Medicaid expenditures. They cite an estimate from the Northwest Health Foundation “…that were hospitals to shift 20 percent of their community benefit expenditures toward community health improvement efforts, the annual yield would be $2.2 billion in additional funds for prevention…”

This is a significant amount of money. In a similar recent analysis for Wisconsin non-profit hospitals, we estimated the following alternative: a minimum 10 percent of total community benefit would be mandated toward the community health improvement category, with an increasing 2 percent obligation for each 2.5 percent increase in hospital profitability for any hospital over 2.5 percent profitability, up to a maximum of 20 percent profitability.

This scenario would more than triple the amount of community health improvement spending through community benefit provision, from $46 million to $139 million, or 13 percent of total community benefit. We presented this model as just one modest example of the amount of revenue that could be derived from such a regulation, and encourage the development of other scenarios or policy alternatives such as alternative modeling approaches varying the minimum or increasing profitability percentage scenarios.

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Will Increased Transparency Requirements For Nonprofit Hospitals Bring Greater Community Health Investments?


October 24th, 2012

Sweeping reforms implemented by the IRS and Treasury in 2009 have pulled back the veil surrounding the community benefit investments required of all nonprofit hospitals seeking federal tax exempt status. Will this new transparency, in combination with important tax law reforms enacted by Congress as part of the Affordable Care Act, lead to greater hospital investment in community health?

The Evolution Of Community Benefit Law

Since the 1950s, federal tax law has recognized that in order to qualify for tax-exempt status, nonprofit hospitals owe certain duties to the communities they serve. IRS Revenue Ruling 56-185 (1956) established a “financial ability” standard that required charitable hospitals to be “operated to the extent of [their] financial ability for those not able to pay for the services rendered and not exclusively for those who are able and expected to pay.” In 1969, this early ruling was amended by Revenue Ruling 69-545, which substituted a more amorphous “community benefit” standard that has essentially survived into the present time, although with important modifications under the Affordable Care Act.

As noted by the Joint Committee on Taxation, the express purpose of Revenue Ruling 69-545 was to eliminate any enforceable obligation on the part of tax-exempt hospitals to furnish financial assistance to indigent inpatients. Following an unsuccessful legal challenge to the validity of the ruling (Eastern Kentucky Welfare Rights Organization v Simon, 370 F. Supp. 325, 338 (D.D.C. 1973), rev’d, 506 F.2d 1278 (D.C. Cir. 1974), vacated on other grounds, 426 U.S. 26 (1976)), the community benefit standard remained moribund and essentially went unexplored for decades.

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Do You Really Mean Health Expenditures?


August 7th, 2012

Using the term health expenditures yields a narrow and seriously misleading view of what it will really cost to improve population health. I’ve been worried about this for some time, but most recently while reading the excellent and important new report on For the Public’s Health: Investing in a Healthier Future from the Institute of […]

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Beyond The Triple Aim: Integrating The Nonmedical Sectors


May 19th, 2008

Editor’s Note: In a paper in the recently released May/June issue of Health Affairs, Donald Berwick, John Whittington, and Tom Nolan of the Institute for Healthcare Improvement lay out a strategy for improving American health care through the pursuit of the “’Triple Aim’: improving the individual experience of care; improving the health of populations; and […]

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