Improving Population Health

Will Increased Transparency Requirements For Nonprofit Hospitals Bring Greater Community Health Investments?

This post originally appeared on the Health Affairs Blog:

Rosenbaum S & Kindig DA, "Will Increased Transparency Requirements For Nonprofit Hospitals Bring Greater Community Health Investments?" Health Affairs Blog, 10/24/12, http://healthaffairs.org/blog/2012/10/24/will-increased-transparency-requirements-for-nonprofit-hospitals-bring-greater-community-health-investments/, Copyright ©2012 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

For additional reading on this topic, please see Bakken E, Kindig DA (2012). "Is Hospital 'Community Benefit' Charity Care?" Wisconsin Medical Journal, 11(5), 215-219.

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By Sara Rosenbaum, J.D. and David A. Kindig, M.D., Ph.D.

Sweeping reforms implemented by the IRS and Treasury in 2009 have pulled back the veil surrounding the community benefit investments required of all nonprofit hospitals seeking federal tax exempt status.  Will this new transparency, in combination with important tax law reforms enacted by Congress as part of the Affordable Care Act, lead to greater hospital investment in community health?

The Evolution Of Community Benefit Law

Since the 1950s, federal tax law has recognized that in order to qualify for tax-exempt status, nonprofit hospitals owe certain duties to the communities they serve.  IRS Revenue Ruling 56-185 (1956) established a “financial ability” standard that required charitable hospitals to be “operated to the extent of [their] financial ability for those not able to pay for the services rendered and not exclusively for those who are able and expected to pay.”  In 1969, this early ruling was amended by Revenue Ruling 69-545, which substituted a more amorphous “community benefit” standard that has essentially survived into the present time, although with important modifications under the Affordable Care Act.

As noted by the Joint Committee on Taxation, the express purpose of Revenue Ruling 69-545 was to eliminate any enforceable obligation on the part of tax-exempt hospitals to furnish financial assistance to indigent inpatients.  Following an unsuccessful legal challenge to the validity of the ruling (Eastern Kentucky Welfare Rights Organization v Simon, 370 F. Supp. 325, 338 (D.D.C. 1973), rev’d, 506 F.2d 1278 (D.C. Cir. 1974), vacated on other grounds, 426 U.S. 26 (1976)), the community benefit standard remained moribund and essentially went unexplored for decades.

Population Health: If It's Everything, Is It Nothing?

By David A. Kindig, MD, PhD

A respected colleague recently emailed a response to the post on advance directives that “it could imply that everything is about population health (which, as you and I agree, I hope) doesn’t do much to advance the cause of purchasing population health.”

Hmmm…if it’s everything, is it nothing? A look at the population health model underpinning this blog and all I work on in population health, suggests that indeed it is perhaps everything: a broad set of outcomes produced by a comprehensive set of determinants which are influenced or activated by programs and policies in the public and private sectors.

Doing Well or Doing Better

By David A. Kindig, MD, PhD

When it comes to population health, is being the best the only thing we want to measure and reward? What about communities and states that are improving most rapidly, particularly from poor baselines? This issue is front and center in education policy: should we reward or incentivize schools or teachers who have the best student test scores, or those demonstrating greatest improvement?

I think both approaches are useful. Overall achievement should be measured and recognized, as with Olympic medals. But there’s also a case to be made for keeping track of improvement, particularly for purposes of allocating resources to communities with formidable social and economic challenges.