Another problem with community benefit is it’s virtually impossible to compare hospitals’ community benefit spending apples to apples because they all report slightly differently. The Affordable Care Act helped in 2009 by adding lines to hospitals’ tax forms where they report how much they spend on community benefits, but many feel more regulation is needed. Today, some report charity care based on the charge amount; others emphasize the cost of providing the care.
And there’s little guidance around what types of activities do and do not qualify. California Assemblyman Jim Wood’s proposal seeks to solve that problem.
Rather than demanding certain spending amounts, Wood said he’s simply trying to create uniform definitions of charity care and other forms of community benefit. For example, it would require charity care be reported at cost rather than charges. Marketing activities could no longer be counted.
The California bill also seeks to improve transparency by requiring hospitals to report community benefit spending individually, rather than health systems reporting them in the aggregate, as is done currently. Wood said it was inspired by a conflict between government officials and residents of Crescent City and Sacramento-based Sutter Health, which runs the local hospital.
“As we see more consolidation of hospitals into larger and larger systems, there are certainly benefits for the entities that are consolidating and becoming larger, but is that really benefiting the community? I don’t know,” Wood said. “That’s what we’d like to have data to see.”
Hospitals sometimes release community benefit reports that are vague and make it difficult to quantify the value of the work they’re doing, said Anthony Wright, executive director of the consumer advocacy group Health Access California. “At some level, it’s good to have standardization just to get some sense of what they mean,” he said.
It’s unclear whether attempts by state lawmakers to regulate hospital community benefit spending are increasing. The issue has long been a hot topic at the federal level, with Sen. Chuck Grassley carrying the torch. In February, the Iowa Republican asked the IRS commissioner for a briefing on its hospital community benefit audits. The commissioner responded in an April letter, in which he said the agency reviewed 832 tax-exempt hospitals between February 2018 and February 2019. Of those, 129 had been referred for compliance checks, and 89 had since closed. Grassley’s office redacted the IRS’ response to his question about which ACA community benefit provisions hospitals were not in compliance with. A Grassley spokesman declined to explain the redaction.
State attorneys general more commonly regulate community benefit spending than lawmakers, said Clary, of the National Academy for State Health Policy. Regulations require public reporting and there is also peer pressure to do so, as well as requirements attached to approvals for mergers and acquisitions, she said.
“I think that’s where the teeth are,” Clary said.