How we could change the community benefit standard for the better

The Lown Institute just released a report on Fair Share Spending, finding that 82% of private nonprofit hospital systems spend less on charity care and community investment than they receive in tax breaks. The total deficit across all systems comes out to more than $18 billion.

While this deficit is disappointing, it’s not surprising given the lack of regulation around the community benefit standard. Nonprofit hospitals aren’t under legal obligation to spend a certain amount on meaningful community benefits. They receive the tax benefits no matter what they spend, which creates the incentive to spend as little as possible.

At the Fair Share Spending launch, North Carolina Treasurer Dale Folwell, Chief People and Equity Officer at Health Leads Jennifer Valenzuela, and Lown Senior Fellow Paul Hattis discussed how we can better hold hospitals accountable for spending their fair share on communities. (Watch the video of the event.)

In a recent article in Health Affairs Forefront, professor of health policy and management at Johns Hopkins Bloomberg School of Public Health Ge Bai and colleagues discuss what changes we need to the community benefit standard to increase accountability for hospitals and improve health in our communities.

Here are a few of the changes the authors suggest:

  • Require hospitals to report the value of their property and sales tax exemptions. Putting an exact number on what municipalities are giving up in property taxes would be incredibly useful for policymakers and community advocates to measure against hospitals’ meaningful community benefit spending.
  • Measure and report community health interventions’ role in influencing health outcomes. As Paul Hattis discussed at the Fair Share Spending launch, measuring the “inputs” of community benefit programs (how much money goes into them) rather than the “outputs” (the outcomes on health metrics) is backwards, but we do it this way because the community benefit standard is run through the tax code. We need to add requirements for hospitals to show how their spending is actually improving health within the community. Doing so could also encourage more hospitals to spend on the upstream factors that determine health.
  • Prohibit hospitals from any collections actions against patients with outstanding medical bills who are eligible for financial assistance. Currently the rule only prohibits “extraordinary collection action,” which still allows unfair collections, such as wage garnishment.
  • Specify that members of the hospital board should reflect a diversity of backgrounds from their community (not just corporate insiders who happen to live in the same city as the hospital). As we’ve seen with safety net hospitals, community input on the board and other advisory groups has a huge impact on the hospitals’ priorities.
  • Specify that medical training, education, and research spending should align with long-term community needs. This is important because hospitals get credit for their health professions training and research, but there’s currently no required link between community’s health needs and this work.

These recommendations would go a long way toward shifting community benefit spending to the areas that matter most. Other potential policy changes could be:

  • Require hospital systems to report their community benefit spending broken out by individual hospital, so policymakers and community advocates know how much their local hospital is spending.
  • Require hospitals to report how much they spend on programs that directly address the priority health needs identified in the Community Health Needs Assessment (Massachusetts currently does this).
  • Evaluate hospitals’ tax exemption value and financial standing to create individualized community benefit spending minimums (Oregon currently does this).

For more, read the Health Affairs piece and check out the video of the Fair Share Spending launch.