New legislation would increase transparency for nonprofit hospitals

The “Tax Exempt Hospital Transparency Act,” (H.R. 9504) which recently passed the House Ways and Means Committee along party lines, puts nonprofit hospitals in the spotlight. The bill would require nonprofit hospitals to report more financial and community benefits information on their IRS Form 990, a policy change that advocates and researchers (including the Lown Institute) have recommended.  

The Lown Institute has documented ways in which some nonprofit hospitals fall short in fulfilling their mission, such as not giving back as much to communities as they receive in tax exemptions, paying their CEOs exorbitant amounts, and allowing aggressive actions to collect medical debt from patients.

“There have been a lot of shortcomings in what we know about nonprofit hospitals and their behavior, and there have been a number of issues that have surfaced over the past several years,” Lown Institute president Dr. Vikas Saini told The Center Square, in a recent article on the bill. “This bill is a major step forward in making these issues more transparent.”

Here are the top-line changes:

Financial assistance

Hospitals already report the amount they spend on financial assistance (free and discounted care for low-income patients). The bill would also require them to report the number of applications received, granted, and denied. This is important information for community advocates and policymakers to understand how often patients are applying for financial assistance and how often they are denied.

Community health needs

Hospitals are already required to conduct a community health needs assessment every three years to identify the health needs most important to the community and how they plan to address these needs; however, most hospitals don’t report how much they invest in addressing these needs. This bill would require all hospitals to describe how they are addressing the community’s health needs, and would require “large” hospitals (those with over 100 staffed inpatient beds) to report the specific programs and amount of spending on the top 3 priority health needs.

340B Reporting

Nonprofit hospitals that fulfill certain eligibility criteria can receive deep discounts on medications through the 340B program, but there are no requirements for them to pass discounts onto patients or to spend profits from 340B on community benefit programs. There is also little transparency on how much hospitals make from 340B and how they use the savings. 

“That program was meant to help the poor and those who have poor access to medication. But the problem has been, there’s really no sense of whether that’s actually happening the way it was intended,” said Dr. Saini.

This bill would require “high revenue” hospitals (those with over $100 million in net patient revenue) to disclose how many patients received 340B covered drugs and their insurance coverage, the total 340B savings the hospital received, and the costs that hospitals incurred to participate in 340B. This information will show the breadth and cost of this program and clarify how specific hospitals are benefiting.   

Service line information

Hospitals contend that they lose money on specific types of services and make money on others, but the numbers behind those claims are not easily available. This bill would require high revenue hospitals to report how much they make on each service line (e.g., behavioral health, cancer care, cardiac lab, etc). This can give policymakers more information on how certain services are being reimbursed and whether they should change these rates to ensure access to certain types of needed care. 

Hospital identification

There are many ways to identify a hospital facility—by their name, their CMS ID, their state facility ID, and their tax ID. Since names can change over time, researchers rely on being able to use these IDs and link them to one another, but most hospitals do not include their CMS ID on their tax form. 

Some hospitals also file in a group 990, making it difficult to see how individual hospitals are spending on their communities. This bill would require all hospitals to include their CMS ID on their tax form and require large and high revenue to report metrics by facility.

“These big systems that merge and combine 10, 20, 50 hospitals, their reporting now makes it very hard for anyone to really understand what their behavior is. And quite often, it ends up hiding poor-performing hospitals,” said Dr. Saini. “So I think this kind of transparency is welcome.”

Other information

All hospitals will have to provide their audited financial statements on their Form 990, which can be difficult to find. Large hospitals would have to include spending on quality improvement and non-clinical programming (e.g. administrative support, scheduling and patient services, billing and coding, lobbying), and high revenue hospitals would have to report their spending on advertising. All of these items give communities and policymakers additional insight into how hospitals allocate their budgets and whether these priorities are serving community needs.

What’s missing?

What’s missing from the Tax Exempt Hospital Transparency Act? Reporting requirements around extraordinary collection actions (ECAs) would be beneficial, so that communities could see how often hospitals sued patients or garnished their wages to collect medical debt. Currently, hospitals have to have a collections policy with the ECAs they allow, but this does not capture how often they actually conduct these actions. 

The bill requires hospitals to explain how their programming is improving community health needs, but doesn’t require that hospitals include targets for their community health programs and report on progress to those targets. Policymakers could leverage this requirement to clarify that hospitals include measurable targets in their community health improvement plans. 

Hospital industry groups like the AHA argue that this bill would add administrative burden that would “shift resources away from patients.” While any reporting requirement does take resources, the bill carves out smaller hospitals, critical access hospitals, and rural emergency hospitals from the more intensive reporting requirements, which are types of hospitals least likely to have the staff to do this work. 

Overall, this bill would be helpful to policymakers and community advocates, who have been begging for more transparency around these issues for years. As Dr. Saini said, it’s “common sense and long overdue.”