Allison Neswood serves as CCLP's Deputy Director of Strategic Priorities. She is an expert in public health insurance plans (Medicaid and CHP+), Aid to the Needy Disabled, immigrant access to services and health equity. Staff page ›

Apr 12, 2019

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Communities will benefit from making nonprofit hospitals more accountable

by | Apr 12, 2019

Colorado’s nonprofit hospitals receive federal, state and local tax exemptions amounting to hundreds of millions of dollars. They receive these massive financial benefits on the premise that they are investing in services that improve health outcomes in the communities they serve.

But are nonprofit hospitals meeting that expectation?

House Bill 1320, which CCLP helped to develop, aims to ensure that Coloradans have access to the information we need to answer that question for every nonprofit hospital in Colorado. Sponsored by Rep. Chris Kennedy and Rep. Susan Lontine and assigned to the House Health and Insurance Committee, the bill is structured to accomplish several goals.

First, the bill is designed to increase the transparency of hospital investments in community health. It will do so by requiring all nonprofit hospitals to submit annual reports to the Colorado Department of Health Care Policy and Financing (HCPF) regarding their community benefit activities. The reports will be submitted through an online report form, will be accessible by the public, and will include each hospital’s most recent Community Health Needs Assessment (CHNA) and community benefit implementation plan as well as information about the community benefit activities hospitals invested in over the previous year.

Second, the bill is designed to better incentivize investments in activities that actually improve health outcomes. Several aspects of the bill contribute to this goal. Transparency itself is one important contributor as research suggests that increasing the transparency of community benefit spending at the state level is the most effective way of increasing overall hospital investments in community health. The bill will also require nonprofit hospitals to report the value of their tax exemptions so we can see whether their community benefit investments are comparable with the financial benefits they receive through our tax system.

In addition, the bill limits what hospitals can count as community benefit for state reporting purposes using a clear definition of community benefit activities. The bill defines community benefit activities as un-reimbursed hospital investments that address community health needs that are identified in partnership with the community and local public health departments. It also defines three categories of community benefit, including: 1) charity care; 2) programs designed to change individual health behaviors or risk; and 3) programs designed to address the social determinants of health (SDOH) – those resources like housing, nutritious food, transportation and income that impact health outcomes.

Robust hospital investments in those areas are likely to benefit community health and, as a result, reduce underlying health care costs. Ensuring access to health care services will help to address disparate access to care. According to one study, eliminating health care disparities for minorities from 2003 to 2006 would have reduced direct medical expenditures by $229.4 billion and indirect costs associated with premature deaths by $1 trillion. In addition, overwhelming evidence suggests that social, economic and environmental factors are more significant predictors of health than access to care. One study found that 40 percent of the factors contributing to length and quality of life are social and economic. These are followed by health behaviors (30 percent), clinical care (20 percent), and the physical environment (10 percent)

Third, the bill is structured to allow apples-to-apples comparisons between hospitals in the state. The bill requires nonprofit hospitals to report about their community benefit activities in a uniform format. It also requires them to list their community benefit activities in the definitional categories, provide the cash value invested in each activity, and assess the effectiveness of each activity in achieving short and long-term community health goals. The ability to compare hospitals in the state will allow Colorado to highlight and learn from hospitals that are making meaningful and effective investments in improving community health. This will also allow us to put more effective pressure on nonprofit hospitals that aren’t doing their fair share.

While it does not require their participation, the bill allows for-profit hospitals to report regarding their community benefit activities as well. Some for-profit hospitals make meaningful contributions in the community benefit space and encouraging them to publicize the information in the same format as Colorado’s nonprofit hospitals will allow Colorado to learn from those activities and to put additional pressure on nonprofits.

Finally, the bill institutionalizes a process for regular community, administrative and legislative review of nonprofit hospitals’ reported activities. The bill creates a Hospital Community Accountability Board (Community Board) in each of the seven Regional Accountable Entity (RAE) regions. Each nonprofit hospital must submit their community benefit activities report to the Community Board in their region and the Community Board is charged with reviewing those reports and making recommendations. In addition, HCPF is required to report on all the community benefit activity reports submitted from across the state to the General Assembly each year, with an eye toward making policy recommendations that could improve outcomes in the hospital community benefit space.

The legislation builds on and fills gaps in federal law. As a condition of their tax-exempt status, federal law requires nonprofit hospitals to complete Community Health Needs Assessments (CHNA) once every three years. In addition, federal law requires tax-exempt hospitals to complete an implementation strategy that outlines how they will go about addressing needs identified in the CHNA. Federal law also requires nonprofit hospitals to describe the community benefits they provide each year on Schedule H of the Form 990, which most nonprofit hospitals must file with the IRS each year.

This bill is designed to strengthen the local oversight of CHNAs and community benefit implementation strategies. In addition, the bill will address several gaps with the Form 990 reporting. In doing so, the bill will help to ensure we know what types of write-offs and spending hospitals are classifying as community benefit. It will help us know how much money hospitals are investing in different types of community benefits and how that compares to the benefit they derive from their tax-exempt status.  And by making that information available and accessible, it will help Coloradans to ensure our nonprofit hospitals are meeting their community benefit obligations and investing in better health for Colorado communities.

-By Allison Neswood

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