Evaluating Hospitals’ Provision of Community Benefit: An Argument for an Outcome-Based Approach to Nonprofit Hospital Tax Exemption

摘要

Nonprofit hospitals are exempt from federal income taxation if they pass organizational and operational tests, including satisfying the community-benefit standard. Policymakers, however, have questioned the adequacy of the community benefits that nonprofit hospitals provide in exchange for these exemptions. The Internal Revenue Service recently responded to these concerns by redesigning its tax forms for nonprofit hospitals. The new Form 990 Schedule H requires nonprofit hospitals to provide additional information about their community-benefit activities. This new reporting requirement, however, places an undue focus on input-based community-benefit indicators, in particular expenditures. We argue that expanding the current input-based reporting requirement to include not only monetary inputs but also population health outcomes would achieve greater benefit for society. NONPROFIT HOSPITALS ARE vital to the health and welfare of millions of Americans 1 and constitute a major portion of our economy. 2 The tax exemption that these institutions received was worth $12.6 billion in 2002 and has subsequently grown. 3 To remain tax-exempt, nonprofit hospitals have to meet the Internal Revenue Service’s (IRS’s) community-benefit standard, which grants health care organizations tax exemptions in exchange for engaging in activities that promote health for the benefit of the community. 4 Policymakers have recently started to question the adequacy of the community-benefit activities that nonprofit hospitals provide in exchange for their substantial tax exemptions. The IRS responded to these concerns by redesigning its federal tax return for nonprofit hospitals, Form 990, and adding Schedule H. 5 However, this new reporting requirement only partially achieves its policy objective because it is hampered by an undue focus on input-based indicators of community benefit, in particular how much nonprofit hospitals spend on community-benefit activities. The current standard does not assess the health outcomes that these community-benefit activities do or do not help to achieve. The community-benefit standard would provide a more meaningful evaluation of hospitals’ community-benefit activities if it complemented input-based measures of community benefit with information on population health outcomes, thereby better effectuating the standard’s original policy goals and achieving greater benefit for society. 6 A standard that includes input as well as outcome measures would offer significant incentives for nonprofit hospitals to increase public benefit. A new community-benefit standard should thus take a more balanced approach, evaluating both input and outcome-related measures, which show how benefit accrues to the public. A more robust conception of community benefit, with tighter criteria for inclusion and exclusion of potential population benefits, would help facilitate this transition. Provisions in the Patient Protection and Affordable Care Act (ACA) have modified the community-benefit standard to include measures of both input and outcomes. As of this year, nonprofit hospitals are required to conduct regular community-health needs assessments and implement improvement plans, which may provide some of the information necessary for a meaningful evaluation of the outcomes of a hospital’s community-benefit initiatives. 7 Policymakers at both the federal and state level have many tools at their disposal to help make the community-benefit standard more outcome-focused. The IRS, for instance, could require nonprofit hospitals to complement their community-benefit expenditures disclosed in Form 990 Schedule H with a detailed report on the population health outcomes of their community-benefit activities. Federal and state governments could then use this information when deciding whether to grant nonprofit hospitals tax exemptions.