Here is part of Dr. Zachary Levinson’s written testimony last week before the Oversight Subcommittee of House Ways and Means:

Federal and State Policy Proposals Intended to Improve Community Benefits

Several federal and state policy proposals have been floated to increase the provision of community benefits and better align these activities with local needs, some of which have already been implemented among a subset of states:

• Expand charity care eligibility, by creating or expanding requirements that hospitals extend charity care to certain groups of For example, the state of Washington requires a group of large hospitals and health systems to provide free hospital care to patients with incomes below 300% of FPL and discounted care to patients with incomes from 300% to 400% of FPL (while allowing hospitals to impose asset tests for the latter group), and it has similar but less extensive requirements for all remaining hospitals.

• Improve uptake of charity care among eligible patients, such as by requiring that hospitals screen patients for eligibility and notify patients of potential eligibility throughout billing and collections processes.

• Establish quantitative standards by requiring that a given hospital spend a minimum amount on certain community benefits (e.g., charity care). A market-based alternative would be to create a floor-and-trade system for charity care where hospitals would be required to either provide a minimum amount of charity care for certain eligibility groups or buy credits from other hospitals that do.  This is intended to account for the fact that the need for charity care varies across communities. Quantitative standards could take hospitals’ financial health into account. For example, Oregon has established a minimum community benefit spending floor that increases with hospitals’ operating margins. 

• Require greater community involvement in hospital decision-making, such as by requiring more extensive involvement from certain community members in the development of community health needs assessments or by specifying that boards of directors are more representative of the community that a given hospital serves.
• Revise IRS community benefit standards to better align with community need, for example, by more clearly recognizing investments in the social determinants of health (e.g., housing) as a community benefit given the growing attention that these initiatives have received as a means for addressing local health  Some have also recommended that the IRS narrow its standards to exclude activities that may do little to address community needs (e.g., opening new facilities in wealthy areas).
• Increase oversight, such as by requiring that hospitals provide more detailed information about their community benefits and report the estimated value of certain tax exemptions (e.g., sales and property tax exemptions). The GAO has also recommended that Congress consider specifying what it considers adequate community benefits, leading to clearer standards for tax-exempt status.

Policies that seek to strengthen the regulation of nonprofit status would inevitably involve tradeoffs. For example, some of the policies discussed above would require new spending from some nonprofit hospitals on specific types of community benefits. While hospitals may be able to respond by operating more efficiently in order to devote more resources to community benefit, it is possible that some would cut costs in ways that are harmful to patients or the broader community, such as by discontinuing certain services or laying off staff. It may be especially challenging for some nonprofit hospitals to implement new community benefit activities given recent financial challenges, such as the erosion of government pandemic relief, labor shortages, and broader economic trends that have led to rising prices and investment losses.

darryll jones