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InDepth: The problem with IRS Form 990 Schedule H

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The problem with Schedule H



Schedule H

A checklist in the Schedule H section of the Internal Revenue Service Form 990 reads:

Does the community health needs assessment describe …

The demographics of the community? Check.

How the data was obtained? Check.

Primary and chronic disease needs? Check.

How needs are prioritized? Check.


But for many of the 990s analyzed by Modern Healthcare, a check mark was missing for the question: “Did the hospital notify members of the community who are most likely to require financial assistance about the financial assistance policy?”

Therein lies one of the fundamental flaws of Schedule H; providers are often not held accountable given the vague framework of their community benefit reporting.

While the narrative section aims to explain where the check marks fall, some say Schedule H reporting is difficult to assess since it's hard to tell if hospitals are helping improve communities year over year.


“The change-makers don't listen to the people,” Chicagoan Helen Little said during a community meeting coordinated by Rush University Medical Center and West Side United, a coalition of health systems, government agencies, residents and community groups.

Tricia Johnson, a professor of health systems management at Rush, said better measures of health outcomes related to community benefit would help all hospitals understand how much they are moving the needle.

A group of University of Michigan and Georgetown University researchers has set out to see what an outcome-based measurement would look like and they laid out some first steps for creating them. The National Quality Forum endorsed a set of standardized, scientifically evaluated indicators that hospitals can use to assess population-health performance. Similarly, the Agency for Healthcare Research and Quality measures preventable admissions that can be used to gauge hospitals' impact on population health. But attributing outcomes to an individual hospital was a challenge, they found.

Meanwhile, hospitals are so focused on checking the regulatory boxes that they lose the real intent behind it, experts said.

When a Catholic Health Association task force was helping guide providers through appropriate community benefit reporting, it asked a hospital for details on $100,000 in reported physician volunteer services. Hospital officials said that it had high school students follow doctors around.

Another hospital asked whether it could count used TVs it donated to a school. The answer was no.

“One could make an argument that the IRS never really made expectations clear about what a hospital should or shouldn't be doing, which is why so much variation exists,” said Bradley Herring, an associate professor at Johns Hopkins Bloomberg School of Public Health who has compared not-for-profit hospitals' community spending to that of for-profits.

But now, the IRS is taking a closer look. For fiscal 2017, out of 1,193 hospitals reviewed, the agency flagged one-third, or 388. Those issues were related to hospitals that didn't file a community health needs assessment, ones that didn't have financial assistance or emergency care policies, and providers that lacked billing and collection requirements, the IRS said.

The agency didn't cite any issues with the 501(r)(5) requirements regarding limitations on charges. That's where the IRS tracks how hospitals calculate the “amount generally billed,” which serves as a cap for those who qualify for financial assistance.

The IRS revoked the tax-exempt status of one unidentified government-run critical-access hospital in February 2017 after it didn't file its community health needs assessment on time and then didn't make it widely available, according to a redacted letter from the agency. It also did not file an implementation report.

“We have moved from the education to the enforcement phase,” said Don Stuart, partner at the law firm Waller Lansden Dortch & Davis. “More hospitals are getting notices from the IRS to provide more information related to where information is supposed to be on their website or other deficiencies. So hospitals have to be reactive now so they don't run into audit issues.”




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