Question of the Week

Question: With tax day this week, I was reminded of a blurb I saw that the IRS just released new rules for nonprofit, tax-exempt hospitals regarding community health assessments.  What are they all about?

Answer:  A provision in the Affordable Care Act requires nonprofit, tax-exempt hospitals to conduct community health assessments.  Regulations to implement that provision were issued by the IRS earlier this month.  78 Fed. Reg. 20523 (April 5, 2013).  Although comments on these proposed regulations will be accepted for 90 days after the publication in the Federal Register, the regulations are in effect now.  The law and proposed regulations require that every three years, each nonprofit, tax?exempt hospital must:

  1. conduct a community health needs assessment (CHNA) to identify unmet health needs in the community;
  2. prioritize those needs;
  3. adopt, by the end of the taxable year in which the hospital conducts the CHNA, an implementation strategy to meet the community health needs identified through the CHNA or explain why the hospital does not intend to address the need;
  4. document its CHNA and implementation strategy in a report that is adopted by the hospital’s governing board or a committee of the board;
  5. publicly publish its CHNA report on its website (which becomes the date the hospital “conducted” the CHNA and starts the clock on the implementation strategy)  and provide an opportunity for public feedback on it; and
  6. report with its Form 990 a copy of its most recently adopted implementation strategy or the URL for it, the URL for its CHNA report and a description of “the actions taken during the taxable year to address the significant health needs identified through its most recently conducted CHNA…or, if no actions were taken with respect to one or more of these health needs, the reason(s) why no actions were taken.”

Failure to either conduct the required health care assessment or to implement strategies to address the identified needs can result in excise benefit taxes of $50,000 and, if the failure is “willful” or “egregious,” loss of the hospital’s tax-exempt status.  For a detailed explanation of these new rules, see the March/April issue of ACTION KIT for Hospital Trustees.