Understanding Community Impact John A. Gale, MS Office of Rural Health Policy Grantee Partnership Meeting September 1, 2009

Contact Information John A. Gale, M.S., Research Associate Maine Rural Health Research Center University of Southern Maine

Knowledge Elements for Community Impact Understand the ways that CAHs impact their communities (service delivery, economic impact, and community benefits) Become familiar with the measurement of these activities and how the data can be used to support and promote CAHs Understand the policy issues driving the interest in measuring the community benefits of hospitals Understand ways that Flex Programs can assist CAHs to better serve their communities and leverage their community impact

National Context Catholic Health Association, VHA, Public Health Institute community benefit reporting initiatives Senate Finance Committee interest in hospital charitable activities –Sen. Grassley, R-Iowa and Sen. Bingaman, D-NM remain committed to setting standards –5% of the greater of operating expenses or revenues has been suggested IRS 2006 Compliance Study of 600 tax-exempt hospitals IRS’s revisions to Form 990 to collect community benefit information (Schedule H)

State Context Community benefit reporting initiatives –Mandatory reporting regulations - 19 –Voluntary reporting through the Attorney General’s Office - 1 –Voluntary reporting through state hospital association - 6 Intent is to quantify community benefits provided by hospitals to justify non-profit tax benefits State efforts to set community benefit standards –Illinois legislature considered a minimum 7% standard –Texas is exploring standards for calculating the cost of charity care –Boston, MA has formed a task force to increase payments in lieu of taxes from non-profit hospitals and universities

Flex Program Context Flex sets expectations and financial incentives for CAHs to: –Engage with their communities, –Develop collaborative delivery systems with CAHs as the hub of those systems of care, and –Undertake collaborative efforts to address unmet community health and health system needs. CAHs need tools to report and strategically manage their community impact/benefit activities and information

CAH Context Not-for-profit and public CAHs are accountable to their communities for their performance and impact Pressure to respond to community needs including care for the uninsured and indigent, long term care, public health Given limited resources, CAHs need to be strategic about their community benefit activities Federal and state reporting expectations CAHs are often the hub of rural health care systems

Community Impact FMT community impact framework includes activities and programs that positively impact the health and well-being of communities, including: –Services provided by CAH to residents of the community that have a source or reimbursement and are expected to be self-sustaining –The economic benefits of the CAH as a major employer and economic engine of the community (Rural Health Works); or –Fall into the more tightly defined category of community benefit activities originally defined by CHA and adopted by the IRS

Community Benefit Programs or activities providing treatment or promoting health in response to identified community need. Key criteria: –Generates a low or negative margin; –Responds to needs of special populations (e.g., uninsured); –Supplies a service/program that would likely be discontinued if based on financial criteria; –Responds to public health needs; or –Involves education or research that improves overall community health.

Community Benefit: Patient Care Services Charity care: –Free and discounted services provided to persons who cannot afford to pay and meet criteria for financial assistance; does not include bad debt Bad debt: –Uncollectible charges from persons that have failed to pay; excludes contractual adjustments Government-Sponsored Health Care –Unpaid costs/shortfalls for care provided to beneficiaries covered by Medicaid, SCHIP, local or state public or indigent care programs, and Medicare, where appropriate. Excludes contractual adjustments

Community-Benefit: Community Programs and Activities Community Health Improvement Services Health Professions Education Subsidized Health Services Research Financial and In-Kind Contributions Community-Building Activities Community Benefit Operations

Evidence Supporting Community Benefits Community need –Program responds to documented health need/problem –Board/management considered community needs as a primary rationale –Community stakeholders were involved in program’s origins and design –Measurable improvement in targeted health status can be demonstrated Improved access to services –Program is broadly available to the public –Access to services would be lost if program ended –People with demonstrated access barriers benefit from program –Significant numbers of vulnerable people use the program –Access barriers are reduced or eliminated

Evidence Supporting Community Benefits Enhanced population health –Program: uses public health principles to eliminate health disparities/ achieve Healthy People 2010 goals; yields measurable health status improvements, or operates in collaboration with public health partners –Public health departments provide comparable services –Community health status would decline if program closed Advancement of knowledge –Results of hospital supported research activities are available to and benefit the public –Education programs are open to community –Trainees are not required to join hospital staff –Students advance towards health professions degrees or licenses

Evidence Supporting Community Benefit Charitable purposes –Program relieves government’s or other tax-exempt organization’s burden –Government provides same service –Government explicitly supports activity (NIH) –Program receives philanthropic support –Service is rarely performed by a taxable organization –Program encourages collaboration, even with competitors

What Doesn’t Count? Programs or activities that: –A “prudent layperson” would question –Do not involve hospital resources –Benefits the hospital more than the community (e.g., some marketing activities) –Are not available to the public –Represent a normal “cost of doing business” –Are associated with current standards of care

IRS Form 990, Schedule H Based on CHA standards Mandatory for tax-exempt hospitals – 501(c)3 Optional but not required for all other hospitals –Not a bad idea for those not required to complete Form 990 Tax year 2009 (returns filed 2010), hospitals must complete the full form with data on the value and scope of community benefit activities and charity care

Six Parts of Schedule H I: Charity care and certain other community benefits II: Community building activities III: Bad debt, Medicare, and collection practices IV: Management companies and joint ventures V: Facility Information VI: Supplemental information

Differences Between IRS and CHA Based on extensive comments, IRS adopted the final changes to accommodate concerns about Medicare shortfalls, bad debt, and community building activities. Hospitals must report Medicare shortfalls and bad debt –Neither will automatically be counted as community benefits –Hospitals must justify why some portion of its Medicare shortfalls (if any) and bad debt should be considered a community benefit Hospitals must report community building activities as the IRS wants to collect further data to determine if they are community benefits.

How Can CAHs Prepare for Schedule H? Form committees to strategically address reporting demands Study CHA community benefit accounting framework Review current programs and activities to ensure that they meet IRS standards as community benefits Collect data throughout the year, rather than at year end Think strategically about community benefit activities Consider the use of IT to facilitate data collection Sharpen charity care policies

Capturing Community Benefit Community benefits are typically reported in terms of the dollar value of the costs of developing and offering these services and programs This cost focus tells only part of the story - data is needed on the outputs and outcomes of community benefit activities to tell the full story

Results from 2007 CAH Survey Charity and uncompensated care –99% offer financial assistance to patients. –87% offer both charity care and discounted charges –1/3 base eligibility at % of Federal Poverty Levels. 1/4 use higher income eligibility levels Identifying and addressing unmet community nee ds –48% conducted a formal community needs assessment in the last 3 years –66% have a formal planning process to address hospital and community needs

Results from 2007 CAH Survey (cont’d) Prevention and health improvement –Nearly all offer some combination of community health education, preventive screenings, clinical preventive services, and support services Enhancing community health system capacity –CAHs provide financial and other support to community health care providers including primary care providers (46%), FQHCs (29%), LTC (40%), Mental Health (31%), EMS (34%) –Other health system development activities include: recruitment of providers, job creation and training programs, workforce education.

Results from Pilot Test Participants are not tracking all the CB activities they provide –They will appear to be doing less than hospitals that comprehensively track their efforts Some participants are not tracking charity care and bad debt separately Participants are not tracking strategies used to notify patients about the availability of charity care Participants varied in the extent to which they participate in planning processes to support CB activities

Results from IRS Hospital Compliance Project 488 hospitals participated –93 hospitals in high population areas (19%) –68 CAHs (14%) –78 rural, non-CAH hospitals (16%) –248 in other urban and suburban areas (51%) Aggregate level of community benefits provided –All hospitals: Average – 9% and median – 6% –CAHs: Average – 6% and median – 3% –Rural, non-CAHs: Average – 8% and median – 3% –High population: Average – 13% and median – 10%

Results from IRS Project: Composition of CB Expenditures Areas of CB activity (as a % of overall CB expenditures) for CAHs and rural hospitals –Uncompensated care was highest for CAHs (77%) and rural hospitals (76%) - (56% overall) –Medical training was lowest for CAHs (4%) and rural hospitals (17%) – (23% overall) –CAHs did not report any medical research; it was the lowest category of expenditures for rural hospitals (1%) – (15% overall) –Community programs was the second highest category for CAHs (19%). Rural hospitals expenditures (6%) were similar to other hospitals – (6% overall)

Results from IRS Project: Range of CB Expenditures 5% of the greater or expenditures or revenues has been suggested by Grassley and Bingaman as a minimum standard 39% of CAHs and 31% of rural hospitals (21% overall) had community benefit expenditures that were less than 2% of revenues 61% of CAHs and 57% of rural hospitals (43% overall) had community benefit expenditures that were less than 5% of revenues

Results from IRS Project: CB Activities Uncompensated care –94% of CAHs and 96% of rural hospitals (95% overall) Medical education/training –60% of CAHs and 72% of rural hospitals (77% overall) Medical research –0% of CAHs and 4% of rural hospitals (21% overall) Lectures, seminars, & education –76% of CAHs and 85% of rural hospitals (79% overall) Medical screening –76% of CAHs and 81% of rural hospitals (77% overall)

Results from IRS Project: CB Activities (cont’d) Newsletters/publications –69% of CAHs and 82% of rural hospitals (76% overall) Improving access to care –44% of CAHs and 55% of rural hospitals (56% overall) Immunization programs –49% of CAHs and 45% of rural hospitals (41% overall) Other healthcare promotion –31% of CAHs and 38% of rural hospitals (31% overall) Studies on unmet community healthcare needs –29% of CAHs and 18% of rural hospitals (28% overall)

Concerns CAHs are not tracking all the community benefit activities they provide Due to size and volume, CAHs and rural hospitals are unlikely to participate in medical education and research activities to the same extent that other hospitals do As a result, CAHs and rural hospitals may appear to be doing less than other hospitals

Policy and Reporting Issues Charity care, bad debt, and billing activities will be the focus of attention from policymakers and advocates Efforts to set minimum arbitrary standards for hospitals Substantial administrative burden of CB reporting Some “legacy” activities may contribute comparatively little to the health of the community Attention to CB reporting may shift focus from strategy to accounting exercise Although not required to report to the IRS, public and other hospitals may feel pressure to do so

Resources Rural Health Works (economic impact and planning tools) Catholic Health Association’ Community Benefit Strategies California Hospital Association’s Voluntary Principles and Guidelines for Assisting Low-Income Uninsured Patients American Hospital Association’s Hospital Billing and Collections Practices: Statement of Principles and Guidelines Healthcare Financial Management Association’s Statement 15 Regarding Reporting Charity Care and Bad Debt; the Public Health Institute’s Advancing the State of the Art in Community Benefit: A User’s Guide to Excellence and Accountability

What Can Flex Do? Provide TA and support related to community impact and benefit reporting Encourage CAHs to undertake periodic needs assessments –Provide funding for needs assessments and identify resources Develop collaborative projects to improve community impact and engagement activities Encourage networking at the community level Identify and promote best practices to improve community health Disseminate information on community impact of CAHs