Nonprofit hospitals are required to provide benefits to the communities they serve to keep a tax-exempt status. Nationwide, about 2,900 hospitals (60% of hospitals) are nonprofit, and the financial benefit to these hospitals from being tax-exempt is estimated to be worth $12.6 billion annually.
Historically, much of hospitals’ community benefit activities have been charity care and other forms of uncompensated care. A lack of transparency and wide variations in how, and how much, hospitals spend for community benefits led to increased oversight by the Internal Revenue Service (IRS) and Congress. New community benefit requirements under the Affordable Care Act include community health needs assessments and improvement plans, as well as additional consumer protections on financial assistance, billing, and collections practices.
The benefits of the new requirements go beyond improving health — they include enhanced accountability for hospitals, more effective use of resources, and building community capacity and engagement in addressing health issues.
Assessing community health needs and adopting a strategy to address those needs provides hospitals with a valuable opportunity to work together with community partners to identify strategies for improving health, quality of life, and the community’s vitality.
This Health Policy Snapshot, published online in October 2012, examines the ACA's new requirements and how changes can help improve community health.