The Future of Community Benefit:

1
The Future of Community Benefit

• Presentation to
• Healthcare Association of New York State
• October 25, 2007
• Julie Trocchio
• Senior DirectorCatholic Health Association
• of the United States
• jtrocchio_at_chausa.org

2
Overview

• Where we have been
• Where we are
• Where we are going

3
Where We Have Been

Father Damien cared for lepers and their
families at a leper colony on Molokai, Hawaii.
The bronze statue shows scars of his disease,
visible on his face. After he died of leprosy in
1889, his work was carried on by Mother Marianne
Cope, a Sister of St. Francis of Syracuse.
4
History of Tax Exemption

• 1956 Revenue Ruling
• 1969 Revenue Ruling
• Hearings of 1980s and 1990s

5
Rev. Rul. 56-185

• Tax-Exempt Hospitals
• Serve those unable to pay to hospitals
  financial
• ability
• Not deny medical care to indigents
• Furnish services at reduced rates below cost
• Earnings for improvements and additions
• Not restrict use to physicians with financial
  interest

6
Rev. Rul. 69-545

• Hospitals demonstrate a community benefit by
• Emergency room open to all
• Board of directors from community
• Open medical staff
• Treat public pay patients (Medicare/Medicaid)
• Surplus funds to improve facilities, equipment,
  and
• patient care

7
Congressional Interest Then and Now

• Questions raised by the Ways and Means Committee
  in the 80s and early 90s
• Is there a difference between for-profit and
  not-for-
• profit health care?
• Do not-for-profits continue to deserve
  tax-exemption?
• Should there be a level of effort test?

8
Recent History Community Benefit Programs

• Random acts of kindness
• Hospital-centered
• Sometimes marketing oriented
• Low visibility
• Targeted in corporate campaigns

9
Recent History Tax Exemption

• Hearings during 109th Congress
• Ways and Means
• Senate Finance

10
Recent History Tax Exemption

• Questions raised by the 109th Congress
• Should the playing field be leveled for
  not-for-profit and for-profit health care?
• Are hospitals sufficiently charitable?
• Is the community benefit standard for
  tax- exemption adequate?
• Should the revenue ruling for hospital
  tax- exemption be changed?

11
Internal Revenue Service

• Work plan
• Questionnaire
• Report

12
IRS Interim Report on Tax-Exempt Hospitals

• Findings
• Variation in how hospitals report uncompensated
  care
• Range of eligibility criteria for free
  discounted care
• 97 hospitals written uncompensated care
  policies
• 99 hospitals give uncompensated care
• 90 of hospitals do not deny medical services
  to the
• uninsured
• Average community benefit expense 9 total
• revenues/median of 5

13
IRS Interim Report on Tax-Exempt Hospitals

• Breakdown of community benefit expenses
• -- 56 is uncompensated care
• -- 23 is medical education and training
• -- 15 is research
• -- 6 is community programs

14
State Activity

• 18 states community benefit legislation
• 7 states require community involvement
• 5 states minimal level of effort
• 17 states association voluntary reporting

15
Where We Are Community Benefit Programs

• Strategically planned
• Professionally implemented
• Leadership attention
• Collaborative partnerships
• Resources available

16
Where We Are Tax Exemption

• Senate Finance Minority Paper
• IRS 990 H
• State laws

17
Senate Finance Staff Paper on Tax-Exempt Hospitals

• Establish and publish charity policies
• 501(c)3 and 501(c)4 hospitals
• Quantitative standards for charity
• Governing board requirements
• Executive compensation
• Limit charges to uninsured
• Sanctions for failure

18
Senate Finance Paper
The community benefit standard has been widely
viewed as a failure administratively, and, more
important, in providing measured benefit to
low-income families.
19
IRS 990 H

• 990 Revision and 990 H
• -- Governance
• -- Executive compensation
• -- Community benefit report
• -- Billing and collection

20
GAO

• State community benefit standards
• How NFP hospitals report charity care and bad
  debt
• How community benefits are reported
• Level of executive and board compensation

21
2005 GAO Report

• Uncompensated care in five states
• California 3.2
• Florida 5.5
• Georgia 6.9
• Indiana 4.3
• Texas 6.7
• Average 5.32
• Includes charity care and bad debt

22
Where We Are Going Community Benefit Programs

• Integrated into organizational priorities
• Public health-oriented
• Evidence-based
• Measurable and measured
• Part of the solution
• -- Access
• -- Chronic disease management

23
Where We Are Going Tax-Exemption

• More accountability
• More transparency
• Continued interest