Skip to main content
NCBI home page
Lippincott Open Access logoLink to Lippincott Open Access
. 2023 Mar 9;68(2):83–105. doi: 10.1097/JHM-D-22-00156

When States Mandate Hospital Community Benefit Reports, Provision Increases

Hossein Zare 1,✉, Corinne Logan 1, Gerard F Anderson 1
PMCID: PMC9973432  PMID: 36892452

SUMMARY

Goal:

We examined the variation in community benefit and charity care reporting standards mandated by states to determine whether state-mandated community benefit and charity care reporting is associated with greater provision of these services.

Methods:

We used 2011–2019 data from IRS Form 990 Schedule H for 1,423 nonprofit hospitals to create a sample of 12,807 total observations. Random effects regression models were used to examine the association between state reporting requirements and community benefit spending by nonprofit hospitals. Specific reporting requirements were analyzed to determine whether certain requirements were associated with increased spending on these services.

Principal Findings:

Nonprofit hospitals in states that required reports spent a higher percentage of total hospital expenditures on community benefits (9.1%, SD = 6.2%) compared to states without these requirements (7.2%, SD = 5.7%). A similar association between the percentage of charity care and total hospital expenditures (2.3% and 1.5%) was found. The greater number of reporting requirements was associated with lower levels of charity care provision, as hospitals allocated more resources to other community benefits.

Practical Applications:

Mandating the reporting of specific services is associated with greater provision of certain specific services, but not all. A concern is that when many services must be reported, the provision of charity care might be reduced as hospitals choose to allocate their community benefit dollars to other categories. As a result, policymakers may want to focus their attention on the services they most want to prioritize.

INTRODUCTION

The amounts of charity care and community benefits that nonprofit hospitals provide vary considerably (Baehr et al., 2018; Colombo, 2005; Zare et al., 2021a). Many governmental policymakers are interested in increasing community benefit and charity care. One approach is simply to require the reporting of this information, and many states have done that. In states with mandated reporting, there is a considerable amount of variation in data requirements. This article considers whether mandated reporting of certain community benefits is associated with greater provision of those services and identifies which mandates have the greatest association with provision.

Nonprofit hospitals are required to report their community benefit spending to the Internal Revenue Service (IRS) and the Centers for Medicare & Medicaid Services (CMS; Goodpasture, 2019). The Affordable Care Act (ACA) mandates unified reporting requirements for nonprofit hospitals, while the IRS requires nonprofit hospitals to report on 17 categories such as charity care, unsponsored research, and Medicaid shortfall. Although the federal government requires nonprofit hospitals to collect data on how much they spend on community benefits, it does not track the impact of this spending on community health (James, 2016; Wen et al., 2022). One study found little association between the level of community benefit spending and health outcomes (Wen et al., 2022).

Many states have mandated reporting certain community benefits for years (Folkemer et al., 2011; Johnson et al., 2019). These states differ considerably on which elements of community benefit they mandate. This article shows the variation across the states. In particular, six states (Illinois, Nevada, Rhode Island, Pennsylvania, Texas, and Utah) require that nonprofit hospitals provide a certain minimum level of charity care.

Numerous studies have found wide variations across nonprofit hospitals in the value of the community benefit and charity care they provide; other studies have compared the value of their community benefit or charity care to the value of their tax exemption (Herring et al., 2018; Johnson et al., 2019; Lamboy-Ruiz et al., 2019). Studies have shown that some nonprofit hospitals spend only a small portion of their community benefit spending on services that help the community and a much greater percentage on services that benefit the hospital (Wen et al., 2022). One study found that for-profit hospitals spent a greater share of the total revenues on charity care than nonprofit hospitals (Bai et al., 2021). These studies have raised interest among policymakers in how to provide incentives for nonprofits to increase the level of community benefit and charity care they provide.

State policies generally go through an iterative process: First, they mandate reporting and then, depending on the result, a minimum level of provision. The results of previous studies of mandate reporting are mixed and no study has focused directly on this topic. Singh and colleagues (2018) reported that when states adopted multiple community benefit and charity care regulations, hospital community benefit spending increased. The presence of multiple regulations increased spending, but no single type of regulation yielded a statistically significant increase (Singh et al., 2018). Other studies have found a positive association between state regulations on free and discounted care (Mose, 2021), the amount of charity care and resource allocation decisions (Gray & Schlesinger, 2009; Lamboy-Ruiz et al., 2019), and types of community benefit spending (Lo Sasso & Seamster, 2007).

This article expands on these previous studies in five main areas. It (1) clearly defines community benefit as the 17 components reported by the IRS and examines all components reported by the IRS, and then excludes Medicaid shortfall and independently examines charity care; (2) measures the association between commonly mandated reporting requirements and their impact on community benefit and charity care spending; (3) controls for states that mandate a minimum level of charity care; (4) considers how reporting requirements have changed (the federal government now requires the reporting of some information, and it is unclear whether the state reporting requirements are still necessary; also, prior studies examined data before the passage of the ACA and before the recent movement of hospitals to address the social determinants of health); and (5) examines the effects of regulations across all states.

Because states impose very different requirements on the provision of community benefits, ranging from no requirements to requiring comprehensive lists of benefits, it is important for state policymakers to know which of these requirements are associated with greater hospital provision of these services. It is also important to know whether imposing additional requirements can affect the distribution of community benefits spending by reducing the level of other services such as charity care. Also, federal policymakers ought to know whether publicizing the levels of community benefit and charity care can influence their provision.

There are two hypotheses regarding the reporting of data. One is that simply requiring the provision of community benefits will have little or no impact on the actual utilization of the benefits. The alternative hypothesis is that the reporting will prompt hospitals to focus on these services as a result of public shaming if the level is low when compared to other hospitals.

STUDY DATA AND METHODS

Data and Sample

For our first analysis (qualitative), we used the 2019 profiles created by the Hilltop Institute at the University of Maryland, Baltimore County (https://www.hilltopinstitute.org/hilltopinstitute.org). The data drew from the full text of the state regulations. The analysis examined whether the state had community benefit and charity care requirements and whether the state had charity care minimum provision requirements. We noted any amendments made after 2011. We did not identify any changes after 2011 except for Utah, which implemented additional requirements in 2014.

Next, we analyzed 2011–2019 charity care and community benefit data from IRS Form 990 Schedule H. The Form 990 data were collected using Candid (https://candid.org/). These data from 2011–2019 were then linked to hospital characteristic 2011–2019 data from the American Hospital Association Annual Survey (https://www.ahadata.com/) and 2011–2019 Medicare hospital cost report (https://www.cms.gov/research-statistics-data-and-systems/downloadable-public-use-files/cost-reports). There is no published crosswalk between the IRS 990 form and Medicare cost report data, so the two data sets were merged using the hospital name, address, zip code, and city. The algorithm was able to merge 82.7% of the IRS data with American Hospital Association and CMS data.

Finally, random effect regression models using Stata (Version 15) were applied to examine the association between specific policies and community benefit spending by nonprofit hospitals. Random effects were used to account for the fact that hospital community benefits are likely to remain similar across years.

State reporting requirements were grouped into six categories: (1) charity care, (2) health services for low-income and indigent patients, (3) healthcare services including services offered without regard to financial return, (4) health promotional services and donations and contributions to health and welfare, (5) community health improvement, and (6) education and research. We examined whether the specific state reporting requirements were associated with increased spending on these specific services.

The study's analytical sample included 1,423 nonprofit hospitals representing 12,807 observations over the 2011–2019 period. (See Appendix 1 to this article, published as Supplemental Digital Content at http://links.lww.com/JHM/A91.)

Outcomes

Community Benefits, Community Benefits Without Medicaid Shortfall, and Charity Care

IRS Schedule H defines 17 types of community benefits on Form 990. There are eight categories of financial assistance and other community benefits (Part I, lines 7a–7k, Column C) and nine categories of community-building activities (Part II, lines 1–9, Column C). Using these data, three measures for community benefits were created: (1) total community benefit amount by including all 17 components, (2) all 17 types of community benefits excluding unreimbursed Medicaid costs, and (3) only charity care and free and discounted community care. Medicaid shortfall was subtracted as a community benefit (Bai et al., 2021; Barnett, 2020). The main reason for excluding it was that the most expensive hospital can be expected to have the greatest Medicaid shortfall (Cunningham et al., 2016). Total community benefit and charity care spending are likely to be associated with the total expenses of the hospital. The average number of beds and revenues vary across states, so total spending on charity care and community benefits was divided by the hospital's total expenses to measure the percentage of total spending on these services.

Explanatory Variable of Interest and Covariates

State Type and Minimum Charity Care Requirement

States were dichotomized into two groups depending on whether they had mandated community benefit reporting. When five or more states required a specific item, the association with that specific requirement and the level of community benefit and charity care provision was examined.

To account for the six states (Illinois, Nevada, Rhode Island, Pennsylvania, Texas, and Utah) that impose minimum charity care provision requirements, a dummy variable was created for those states.

Hospital Characteristics

Studies have shown that specific hospital characteristics are associated with higher levels of community benefit and charity care spending (Herring et al., 2018; Zare et al., 2021a, 2021b). These characteristics are the number of hospital beds, teaching status (defined as minor-teaching if the intern-to-bed ratio is < 0.25 or major-teaching if the intern-to-bed ratio is > 0.25), church affiliation, percentage of Medicare and Medicaid discharges, number of physicians with admitting privileges, system affiliation, availability of obstetrics or trauma services, and rural location.

Hospital market characteristics have also been shown to be associated with the provision of these services, so we used the Herfindahl-Hirschman Index (Herring et al., 2018) to categorize hospitals into low (<0.15), medium (0.15–0.25), and high (>0.25) concentration markets. Hospitals in states that had expanded Medicaid coverage were identified because Medicaid expansion could reduce the need for charity care and other community benefits. In Appendix 1 (published as Supplemental Digital Content at http://links.lww.com/JHM/A91), we compare the hospital characteristics between the two groups of states.

Statistical Analysis

For each nonprofit hospital, the percentage of total expenses spent on community benefits, community benefits excluding Medicaid shortfall, and charity care were calculated. Descriptive statistics were used to compare the community benefit spending associated with reporting requirements. An unequal t test was used to compare the value and percentage of community benefit. Random effect regression was used to examine the association between the level of comprehensiveness of the charity care and community benefit reporting requirements by the states and the provision of specific services. The impact of specific reporting requirements was also considered. The models were adjusted for hospital and market characteristics, Medicaid expansion, and whether the state had a minimum charity care policy.

Limitations of Data Analysis

Three limitations of the data analysis should be noted. First, the data are self-reported to the IRS and other sources—although there are penalties for inaccurate reporting. Second, data on 15% of nonprofit hospitals could not be matched across the different data sources. The hospitals that could not be matched had slightly higher levels of community benefit (8.76% vs. 8.10%, p < .001), and charity care (2.81% vs. 1.97%, p < .001) spending, but they had similar income to that of matched hospitals. Third, the reasons for the level of spending on these services and the allocation decisions could not be studied because of the randomness of states' reporting policies.

RESULTS

Study Population

As noted earlier, there were 1,423 hospitals (12,807 observations) reporting data between 2011 and 2019. These hospitals had an average of 201 beds; 24% were teaching hospitals, 84% were non-church-operated hospitals, 59% of had system affiliation, 59% were obstetrics providers, and 41% were trauma center hospitals located in highly concentrated markets. Hospitals in states with community benefit policies were more likely to be larger hospitals (233 beds vs. 156 beds) and more likely to be major teaching hospitals, non-church operated, and affiliated with a system. They were less likely to have trauma centers but more likely to be obstetrics providers and to be located in areas with less concentrated markets (see Appendix 1, published as Supplemental Digital Content at http://links.lww.com/JHM/A91).

Reporting Requirements

Table 1 summarizes state laws and regulations on community benefits for the 28 states with reporting requirements. The states require various categories of data. In those categories, the most common requirements are charity care and free or discounted healthcare services (28 states); health services for vulnerable and low-income populations regardless of insurance and for indigent patients (8 states); healthcare services offered without regard to financial return (8 states); health promotion services such as free preventative care, unprofitable medical services, and contributions to local health and welfare such as disaster planning and donations of food, shelter, and clothing (9 states); education and research such as subsidies for healthcare professions, antismoking education programs, public education programs, and training (7 states); and services such as foundation-based activities, funds, property, services, or other resources to support community healthcare needs (5 states).

TABLE 1. Community Benefit Policies Across States.
State Specified Community Benefits Categories of Data First Year of State-Mandated Requirements
CA Community benefits include, but are not limited to, any of the following:

  • healthcare services rendered to vulnerable populations, including but not limited to the uninsured, underinsured, and those eligible for Medi-Cal, Medicare, California Children's Services Program, or county indigent programs;

  • the unreimbursed cost of services;

  • financial or in-kind support of public health programs;

  • donation of funds, property, or other resources that contribute to a community priority;

  • healthcare cost containment;

  • enhancement of access to healthcare or related services that contribute to a healthier community;

  • services offered without regard to financial return because they meet a community need in the service area of the hospital, and other services including health promotion, health education, prevention, and social services; and

  • food, shelter, clothing, education, transportation, and other goods or services that help maintain a person's health.

It exempts a healthcare project proposed by a hospital that agrees to provide free healthcare services to indigents, over 5 years, equivalent in dollar value to that of the proposed healthcare project.		 The 8 requirements listed 1996
CO The hospital must participate in a state program that provides state and federal funds to provide free and reduced-cost care or have financial assistance or have a financial assistance policy. Charity care, uncompensated care to indigents 2000
DE As a condition of certificate of public review approval, Delaware requires all healthcare facilities to “perform and accept charity care . . . to the extent required by the [Delaware Health Resources] Board.” A certificate of public review is required to construct or acquire a healthcare facility, increase bed capacity, acquire major medical equipment, or spend more than $5.8 million on a hospital project. The board can condition charity care and preferred level for approval. Charity care, minimum level of contribution 1994
FL Nonprofit hospitals must provide Medicaid and charity care. Charity care, Medicaid 1990
GA The state may require hospitals to provide a certain amount of uncompensated clinical health services to indigents or charities to be granted a certificate of need (CON). Charity care, certain amount of uncompensated clinical health services to indigents 2005
IL To be considered tax-exempt, the hospital must provide free or discounted health services to low-income individuals. Services may include, but not be limited to, providing the following to low-income or underserved individuals or facilities that serve those populations:

  • providing financial or in-kind support to affiliated or unaffiliated hospitals, hospital affiliates, community clinics, or programs;

  • paying for or subsidizing healthcare professions;

  • providing or subsidizing outreach or educational services for disease management and prevention;

  • providing free or subsidized goods, supplies, or services to care for medical conditions; and

  • providing prenatal or childbirth outreach.

 The 5 requirements listed 2012
IN The nonprofit hospital must develop goals and objectives for providing charity care and government-sponsored indigent healthcare. Charity care, government-sponsored indigent healthcare 1994
ME All hospitals must provide medically necessary care for no or reduced cost to low-income residents. Medically necessary care for low-income residents 1995
MD Community benefit means a planned, organized, and measured activity that is intended to meet identified community health needs within a service area, including

  • a community health service;

  • health professional education;

  • research;

  • a financial contribution;

  • a community-building activity, including partnerships with community-based organizations;

  • charity care;

  • a community benefit activity that is funded by a foundation;

  • a mission-driven health service;

  • an operation related to an activity is described under community benefits; and

  • financial or in-kind support of the Maryland Behavioral Health Crisis Response System.

 The 10 requirements listed 2006
MA To be licensed, all hospitals must agree to maintain or increase a percentage of gross patient service revenue to free care. Nonprofit hospitals must develop individual community benefits plans with specific activities serving disadvantaged populations that may include, but are not limited to,

  • outreach health education;

  • free preventative care or health screening services;

  • mobile health vans with direct services;

  • support for and participation in community-oriented training programs;

  • low or negative margin services are offered in response to identified community needs;

  • violence-reduction education and counseling;

  • antismoking education;

  • substance abuse education—preventative and acute treatment;

  • domestic violence and/or child abuse and neglect prevention and intervention;

  • early childhood wellness programs;

  • expanded prescription drug programs;

  • volunteer services performed during hospital time;

  • net financial assistance to independently licensed and hospital-licensed community health centers;

  • unfunded services that are adjacent to Medicare/Medicaid care;

  • free legal services; and

  • medical and clinical education and research on a previously assessed community need.

 The 16 requirements listed 2009 (Free care requirement passed in 1996, specifics in 2009)
MS To be exempt from taxes, hospitals must maintain one or more wards for charity patients and no income can be used for profit.
A CON is needed for the hospital to perform new services and other proposals. CON approval requires a hospital to provide a reasonable amount of indigent care. Reasonable care is determined by like hospitals in a similar geographic area. CON approval requires that new services will not impede existing indigent care.		 Charity care, reasonable amount of indigent care 1990 (CON defined in 1979)
MT Hospitals must have a charity care policy reflective of industry standards (and tax status) and may not refuse treatment based on patients' ability to pay. Charity care, patient's ability to pay 2009
NV Hospitals with at least 100 beds and located in a county with at least 2 licensed hospitals must provide free care for low-income uninsured patients. Free care for low-income uninsured patients 1987
NH Every healthcare charitable trust, including nonprofit hospitals, with funds over $100,000 must develop an annual community benefits plan. Community benefit means hospital activities that are intended to address community healthcare needs including, but not limited to,

  • charity care;

  • financial or in-kind support of public health programs;

  • allocation of funds, property, services, or other resources that contribute to community healthcare needs;

  • donation of funds, property, services, or other resources, which promote or support a healthier community, enhanced access to healthcare or related services, health education and prevention activities, or services to a vulnerable population; and

  • support for medical research and education and training of healthcare practitioners, including the pooling of funds by different healthcare charitable trusts for this purpose.

To be issued a CON, hospitals are required to provide free care to low-income patients (the CON application asks about the degree to which the proposed project would serve medically underserviced).		 The 5 requirements listed 2000
NM To be licensed, hospitals must provide emergency services and general health services to nonpaying and low-income patients. Emergency services and general health services to nonpaying and low-income patients 2003
NY The statewide pool of funds to cover indigent care is available only to hospitals that have financial assistance policies and procedures by state guidelines. Financial assistance 1996
NC The state considers the extent to which the healthcare facilities will contribute to the health and welfare of the area when issuing licenses and community benefits for tax-exempt status. Community benefits 1976
OH All hospitals that receive state funds for uncompensated care must provide basic, medically necessary inpatient and outpatient services. Basic, medically necessary inpatient and outpatient services 2015
OK All hospitals must develop a discount program that limits the discounted cash price to Medicare prices. Only financial assistance 2007
PA To be considered tax-exempt, hospitals must be a purely public charity defined by

  • advancing charitable purpose;

  • donating or rendering gratuitously a substantial portion of its services;

  • benefiting a substantial and indefinite class of persons who are legitimate subjects of charity;

  • relieving the government of some of its burden; and

  • operating entirely free from the private profit motive.

 Purely public charity 1997
RI To be licensed, all hospitals must meet statewide community standards for the provision of charity care. They must

  • meet the statewide community needs for the provision of charitable care;

  • meet standards for assurance of the continuance of uncompensated care and community benefits;

  • not discourage persons who cannot afford to pay from seeking essential medical services; and

  • not encourage persons who cannot afford to pay to seek essential services from other providers.

When granting licenses, the state considers the nonprofit hospital's

  • standing in a community;

  • safeguards to ensure the community has access to affordable care;

  • evidence that the facility will provide healthcare access to traditionally underserved populations;

  • procedures or safeguards to ensure ownership interests will not be used as incentives for employees;

  • commitment to collective bargaining rights (if applicable) and retention of the workforce;

  • commitment to employee needs; and

  • service in the public interest with safe and adequate treatment, appropriate access, and balanced healthcare.

When granting licenses to for-profit hospitals and in acquisitions, the state considers if the hospital demonstrates a substantial linkage between the hospital and the affected community through

  • uncompensated care, charity care, cash, or in-kind donations to community programs;

  • education and training of professionals in community health issues;

  • relevant research initiatives; and

  • essential but unprofitable medical services.

 Charity care, broad definition State mandated in 1996, enacted in 1997
SC All hospitals need a CON to establish a new facility or expand hospital services. CON application requires an indigent care plan, which must include

  • treatment and admission policies about race, sex, creed, national origin, and ability to pay;

  • treatment and admission policies for indigent patients who are not able to pay at the time of admission and whose benefits expire during the care period;

  • amount in dollars and percentage of the gross income of indigent care provided prior fiscal year (existing facilities only);

  • proposed indigent care facility amount in dollars and percentage of gross income for the current year and next year;

  • the explanation for the answer in any plans the hospital has to address indigent care in the community; and

  • indigent care board roles and responsibilities.

 Indigent care plan 1976
TX To be considered tax-exempt, nonprofit hospitals must provide charity care and community benefits greater than or equal to state specifications. Charity care, community benefits greater than or equal to state specifications 1980
UT To be considered tax-exempt, the nonprofit hospital must provide a gift to the community defined as either “a substantial imbalance in the exchange between the charity and the recipient of its services or the lessening of a government burden through the charity's operation.” Utah identifies gifts to the community as

  • indigent care (added in 2014),

  • community education and service,

  • medical discounts,

  • donations of time, and

  • donations of money.

 Gift to the community 1985
2014
VA CON approval may be conditional on the level of charity care or the requirement to accept patients needing specialized care.
Primary medical care services are provided in medically underserved areas of the community.		 Level of charity care 1982
Boosted in 1993 with the same condition
WA All hospitals must develop, implement, and maintain a charity care policy to enable low-income individuals to access appropriate hospital-based medical services. Charity care 1990
WV To be eligible for tax-exempt status, a hospital must use property in a charitable manner by

  • providing health services to individuals who cannot afford such services in a volume and frequency determined by the hospital board;

  • providing activities that promote the health of the community served by the hospital and decreasing the burden on the state, county, and municipal governments;

  • providing activities that promote the health of the community may include, but are not limited to,

  • providing free at-cost or below-cost health screenings and assessments; social services assistance and counseling;

  • operating free or reduced charge medical clinics;

  • operating poison control centers;

  • providing free or below-cost blood bank services;

  • free or-below cost assistance, material, equipment, and training to ambulance services;

  • providing public education programs relating to preventative medicine or public health;

  • donating medical supplies, equipment, and manpower;

  • disaster planning; and

  • covering unreimbursed costs for education and training of medical, nursing, and allied health profession students.

 The 10 requirements listed 1990
WI Each hospital must develop a plan to provide free or discounted care to individuals not able to pay all or a portion of medical bill. Only financial assistance 2001
States with no policy Alabama, Alaska, Arizona, Arkansas, Connecticut, Hawaii, Iowa, Idaho, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, North Dakota, Nebraska, New Jersey, Oregon, South Dakota, Tennessee, Vermont, and Wyoming No policies
Open in a new tab

Note. The data were supplemented by examining the full text of the state regulations. Adapted from Hilltop Institute at the University of Maryland, Baltimore County Community Benefit State Law Profiles, 2019 (https://hilltopinstitute.org/our-work/hospital-community-benefit/hospital-community-benefit-state-law-profiles/).

The Association Between Reporting Requirements and Community Benefit and Charity Care Provision

Nonprofit hospitals in the states with any state reporting requirements spent on average 9.1% (SD = 6.2%) of total hospital expenditure on 17 different types of community benefits (an average of $32.9 million on community benefits). Hospitals in states without reporting requirements spent approximately 7.7% (SD = 5.7%) of total hospital expenditure on community benefits (an average of $17.8 million).

After excluding the Medicaid shortfall, hospital spending was reduced to 5.5% ($20.7 million) in states with requirements and 4.3% ($9.7 million) in states without requirements. Charity care provision averaged 2.3% of total hospital expense ($6.7 million) in states with requirements and 1.5% ($3.6 million) in states without requirements. All differences were statistically significant (p < .001; see Table 2, panels A and B).

TABLE 2. Nonprofit Hospitals' Community Benefit Distribution Using Several Scales, 2011–2019.
Any State Policy (n = 7,548) No State Policy (n = 5,259) Unequal
Test
M (SD) M (SD) p
Panel A
$1,000,000
Charity care 6.74 (12.62) 3.63 (7.59) .000*
Total CB excluded UMD 20.73 (45.78) 9.75 (23.54) .000*
Total CB 32.91 (65.65) 17.78 (35.54) .000*
Panel B
Percentage of total expenses
Charity care 2.33 (2.76) 1.53 (1.56) .000*
Total CB excluded UMD 5.50 (5.33) 4.25 (4.13) .000*
Total CB 9.13 (6.16) 7.72 (5.66) .000*
Panel C
$1,000 per bed
Charity care 29.46 (46.76) 20.73 (48.19) .000*
Total CB excluded UMD 82.11 (208.07) 61.72 (263.17) .000*
Total CB 134.63 (267.10) 110.94 (336.24) .000*
Open in a new tab

Note. CB = community benefit, UMD = unreimbursed Medicaid. Data from IRS Form 990 (https://www.irs.gov/forms-pubs/about-form-990) and American Hospital Association (https://www.ahadata.com/).

*p < .001.

Figure 1 presents the distribution of community benefit spending in nonprofit hospitals between 2011 and 2019. The 17 community benefits on IRS Form 990 were combined into nine categories by putting the nine community-building activities into one category. The hospitals in states with mandated reporting spent their community benefits differently. The top four community benefits across all types of states were Medicaid shortfall, charity care, education, and non-mean-tested health services such as qualifying inpatient programs (e.g., neonatal intensive care and inpatient psychiatric units) and outpatient programs (home health programs). Nonprofit hospitals in states with reporting requirements spent 36.6% on Medicaid shortfall, 20.0% on charity care, 16.8% on education, and 8.9% on non-mean-tested health services. Nonprofit hospitals in states without community benefit requirements spent a higher percentage on Medicaid shortfall (44.8%) and charity care (22.8%), and a lower percentage on education (11.8%), and non-mean-tested health services (9.8%).

FIGURE 1.

FIGURE 1

Open in a new tab

Comparing Community Benefit Spending Distribution Between States With No Policies and States With State Policies, 2011–2019

Association Between State Types and Community Benefit Spending

Table 3 summarizes the findings of the random effect regression analysis, controlling for the community factors described earlier (hospital ownership, number of other types of hospitals in the surrounding area, average income levels, uninsured rates, etc.). In our analysis of the percentage of total spending on these services, nonprofit hospitals in states with reporting requirements spent 0.95% (SE = 0.28) more on total community benefits, 1.05% (SE = 0.23) more on community benefits minus Medicaid shortfall, and 0.88% (SE = 0.10) more on charity care than hospitals in states without these requirements. States with a minimum charity care requirement policy spent 0.90% (SE = 0.36) more on total community benefits, 0.75% (SE = 0.29) on community benefits minus Medicaid shortfall, and 0.50% (SE = 0.13) on charity care. Appendix 2 to this article, published as Supplemental Digital Content at http://links.lww.com/JHM/A92, shows the full results of the regression analysis with all independent variables.

TABLE 3. Regression Models Estimating the Association Between State Reporting Requirements and Community Benefit Spending in Nonprofit Hospitals, 2011–2019.
Community Benefit –Medicaid Shortfall
Coefficient (SE)
Community Benefit
Coefficient (SE)		 Percentage of Total
Hospital Expenses		 Charity Care
Coefficient (SE)
States with reporting requirements (reference: no reporting requirements) 0.951*** (0.282) 1.053*** (0.227) 0.881*** (0.105)
States with minimum charity care requirement 0.898* (0.357) 0.747** (0.287) 0.501*** (0.133)
R2 within 0.001 0.002 0.010
R2 between 0.049 0.092 0.189
ρ 0.608 0.604 0.598
Number of hospitals (per year) 1,423 1,423 1,423
Observations 12,807 12,807 12,807
Open in a new tab

Note. Data from IRS Form 990, 2011–2019 (https://www.irs.gov/forms-pubs/about-form-990) and American Hospital Association, 2011–2019 (https://www.ahadata.com/). Models also controlled for hospital beds, charity minimum requirement, teaching minor and major, church operation, Medicare and Medicaid discharge ratios, system member, obstetric center, rural referral, trauma level, Medicaid expansion status, Herfindahl categories, and year (see Appendix 2 for the full model, published as Supplemental Digital Content at http://links.lww.com/JHM/A92).

*p < .05.

**p < .01.

***p < .001.

Association Between State-Specific Policies and Community Benefit and Charity Care

Policymakers may choose to prioritize the provision of certain services by mandating the reporting of those specific services. Table 4 presents the results of specific policies on the provision of community benefits for specific services. State-mandated reporting on charity care was associated with a 0.78% (SE = 0.10) increase in charity care provision. A positive association between states' policies and the provision of health services for low-income and indigent patients (0.19%, SE = 0.09) and spending on research and education (0.24%, SE = 0.06) was also found. No significant association was found between state mandates and specific types of community benefit by nonprofit hospitals (e.g., healthcare services including services offered without regard to financial return, health promotion services and donation and contribution to health and welfare, and community health improvement). Appendix 3 to this article (published as Supplemental Digital Content at http://links.lww.com/JHM/A93) contains the complete models.

TABLE 4. Models Estimating the Association Between States Mandating Certain Data Reporting and Provision of Specific Community Benefits in Nonprofit Hospitals, 2011–2019.
Charity Care (%) Health Services for Low-Income and Indigent Patients (%) Healthcare Services, Including Those Offered Without Regard to Financial Return (%) Health Promotional Services and Donations and Contributions to the Health and Welfare (%) Community Health Improvement (%) Education and Research (%)
Coefficient (SE) Coefficient (SE) Coefficient (SE) Coefficient (SE) Coefficient (SE) Coefficient (SE)
If states have any specific requirements to report data for that category 0.782** (0.100) 0.194* (0.095) 0.134 (0.172) –0.003 (0.056) –0.157 (0.154) 0.237** (0.056)
R2 within 0.009 0.001 0.003 0.0001 0.0005 0.004
R2 between 0.162 0.006 0.030 0.038 0.0374 0.020
ρ 0.605 0.641 0.665 0.578 0.462 0.695
Number of hospitals (per year) 1,423 1,423 1,423 1,423 1,423 1,423
Observations 12,807 12,807 12,807 12,807 12,807 12,807
Open in a new tab

Note. Data from IRS Form 990 (https://www.irs.gov/forms-pubs/about-form-990) and American Hospital Association (https://www.ahadata.com/). Models controlled for hospital beds, charity minimum requirement, teaching minor and major, church operation, Medicare and Medicaid discharge ratios, system member, obstetric center, rural referral, trauma level, Medicaid expansion status, Herfindahl categories, and year (see Appendix 3 for the full model, published as Supplemental Digital Content at http://links.lww.com/JHM/A93).

*p < .05.

**p < .001.

DISCUSSION

Twenty-eight states have passed legislation requiring nonprofit hospitals to report data on community benefit and charity care. Among these states, there is wide variation in the data that the hospitals are required to report. Some states have defined broad categories while others have chosen specific measures. Some states have also chosen to impose minimum standards of charity care that hospitals must provide.

This study found a positive association between the state having a reporting requirement and the level of charity and community benefit provision. A concern is that states imposing many separate reporting requirements can dilute the impact of any specific requirement, so state policymakers may want to consider carefully which measures should require reporting. For example, our study found that having more reporting requirements is associated with less charity care provision. Reporting requirements are often a first step that states take before they start imposing minimum levels of provision.

The literature on minimum provision requirements is mixed. Some researchers find universal minimum standards to be problematic because the characteristics of nonprofit hospitals and the needs of their communities can vary widely (Tahk, 2014; Valdovinos et al., 2015). Hospital spending can be influenced by a variety of community factors including hospital ownership, the number of other types of hospitals in the area, average income levels, uninsured rates, and so forth. One team of researchers concluded it was difficult to tell if minimum community benefit regulations increased healthcare access for the uninsured or just redistributed the burden onto the public healthcare system (Valdovinos et al., 2015). Other researchers found that minimum thresholds increased spending on community health initiatives but lowered spending on community benefits overall—on charity care, in particular (Singh et al., 2018). However, another team found that mandating a minimum threshold of community benefits would increase spending by 86% by nonprofit hospitals eligible for tax exemptions (Zare et al., 2021b). As noted earlier, state policymakers will need to consider these findings when they mandate reporting data.

This study added to prior studies by using a more current national data set that examines behavior following the imposing of national reporting requirements. It showed that state mandates are associated with the provision of charity care and community benefits that are supplemental to the national requirements. It also showed that certain requirements are more likely to positively affect their provision.

CONCLUSION

Nonprofit hospitals in states with community benefit requirements allocate a higher proportion of their expenses on community benefits, community benefits minus Medicaid shortfall, and charity care in comparison to hospitals located in states without reporting requirements. Mandating the reporting of specific services is associated with greater provision of certain specific services, but not all. A concern is that when many services must be reported, the provision of charity care might be reduced as hospitals choose to allocate their community benefit dollars to other categories. As a result, policymakers may want to focus their attention on the services they most want to prioritize.

Supplementary Material

jhcma-68-083-s001.pdf (98.6KB, pdf)
Open in a new tab
jhcma-68-083-s002.pdf (134.1KB, pdf)
Open in a new tab
jhcma-68-083-s003.pdf (164.7KB, pdf)
Open in a new tab

Footnotes

The authors declare no conflicts of interest.

Supplemental digital content is available for this article. Direct URL citations appear in the printed text and are provided in the HTML and PDF versions of this article on the journal's website (www.jhmjournalonline.com).

Contributor Information

Hossein Zare, Email: hzare1@jhu.edu.

Corinne Logan, Email: clogan16@jh.edu.

Gerard F. Anderson, Email: ganderson@jhu.edu.

REFERENCES

  1. Baehr A., Doty A. M. B., Karp D. N., Rising K. L., Carr B. G., Powell R. E. (2018). Developing data to support effective coordination of nonprofit hospital community benefit investments. Journal of Healthcare Management, 63(4), 271–280. 10.1097/JHM-D-16-00031 [DOI] [PubMed] [Google Scholar]
  2. Bai G., Zare H., Eisenberg M. D., Polsky D., Anderson G. F. (2021). Analysis suggests government and nonprofit hospitals' charity care is not aligned with their favorable tax treatment. Health Affairs (Millwood), 40(4), 629–636. 10.1377/hlthaff.2020.01627 [DOI] [PubMed] [Google Scholar]
  3. Barnett K. (2020). Community benefit: Policies, practices, and opportunities at the half-century mark. Frontiers in Public Health, 8, 289. 10.3389/fpubh.2020.00289 [DOI] [PMC free article] [PubMed] [Google Scholar]
  4. Colombo J. D. (2005). The failure of community benefit. Health Matrix (Cleveland, Ohio: 1991), 15(1), 29–65. https://www.scopus.com/inward/record.uri?eid=2-s2.0-24144443505&partnerID=40&md5=32acb0ec13859e95e3a8a849028c3976 [PubMed] [Google Scholar]
  5. Cunningham P., Rudowitz R., Young K., Garfield R., Foutz J. (2016). Understanding Medicaid hospital payments and the impact of recent policy changes (Issue brief). Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/understanding-medicaid-hospital-payments-and-the-impact-of-recent-policy-changes/ [Google Scholar]
  6. Folkemer D. C., Somerville M. H., Mueller C. H., Brow A. L., Brunner M. A., Boddie-Willis C. L., Nolin M. A. (2011). Hospital community benefits after the ACA: Building on state experience (Issue brief). Hilltop Institute at the University of Maryland, Baltimore County. https://www.researchgate.net/publication/261175563_Hospital_Community_Benefits_After_the_ACA_Building_on_State_Experience [Google Scholar]
  7. Goodpasture J. E. (2019). Calculation of foregone taxes and community benefit for Florida not-for-profit hospitals. International Journal of Healthcare Management, 12(2), 137–140. 10.1080/20479700.2017.1353775 [DOI] [Google Scholar]
  8. Gray B. H., Schlesinger M. (2009). Charitable expectations of nonprofit hospitals: Lessons from Maryland. Health Affairs (Millwood), 28(5), W809–W821. 10.1377/hlthaff.28.5.w809 [DOI] [PubMed] [Google Scholar]
  9. Herring B., Gaskin D., Zare H., Anderson G. (2018). Comparing the value of nonprofit hospitals' tax exemption to their community benefits. Inquiry, 55, 46958017751970. 10.1177/0046958017751970 [DOI] [PMC free article] [PubMed] [Google Scholar]
  10. James J. (2016, February 25). Health policy brief: Nonprofit hospitals' community benefit requirements. Health Affairs. https://doi.org/1377/hpb20160225.954803 [Google Scholar]
  11. Johnson E. K., Hardy R., Santos T., Leider J. P., Lindrooth R. C., Tung G. J. (2019). State laws and nonprofit hospital community benefit spending. Journal of Public Health Management and Practice, 25(4), E9–E17. 10.1097/PHH.0000000000000885 [DOI] [PubMed] [Google Scholar]
  12. Lamboy-Ruiz M. A., Cannon J. N., Watanabe O. V. (2019). Does state community benefits regulation influence charity care and operational efficiency in U.S. non-profit hospitals? Journal of Business Ethics, 158(2), 441465. 10.1007/s10551-017-3757-2 [DOI] [Google Scholar]
  13. Lo Sasso A. T., Seamster D. G. (2007). How federal and state policies affected hospital uncompensated care provision in the 1990s. Medical Care Research and Review, 64(6), 731–744. 10.1177/1077558707305940 [DOI] [PubMed] [Google Scholar]
  14. Mose J. N. (2021). A multilevel mixed-effects regression analysis of the association between hospital, community and state regulatory factors, and family income eligibility limits for free and discounted care among U.S. not-for-profit, 501(c)(3), hospitals, 2010 to 2017. BMC Health Services Research, 21(1), 230. 10.1186/s12913-021-06219-4 [DOI] [PMC free article] [PubMed] [Google Scholar]
  15. Singh S. R., Young G. J., Loomer L., Madison K. (2018). State-level community benefit regulation and nonprofit hospitals' provision of community benefits. Journal of Health Politics, Policy and Law, 43(2), 229–269. 10.1215/03616878-4303516 [DOI] [PubMed] [Google Scholar]
  16. Tahk S. C. (2014). Tax-exempt hospitals and their communities. Columbia Journal of Tax Law, 6(1), 33–85. 10.7916/cjtl.v6i1.2826 [DOI] [Google Scholar]
  17. Valdovinos E., Le S., Hsia R. Y. (2015). In California, not-for-profit hospitals spent more operating expenses on charity care than for-profit hospitals spent. Health Affairs (Millwood), 34(8), 1296–1303. 10.1377/hlthaff.2014.1208 [DOI] [PubMed] [Google Scholar]
  18. Wen G., Zare H., Eisenberg M. D., Anderson G. (2022). Association between non-profit hospital community benefit spending and health outcomes. Health Services Research, 58(1), 107–115. 10.1111/1475-6773.14060 [DOI] [PMC free article] [PubMed] [Google Scholar]
  19. Zare H., Eisenberg M., Anderson G. (2021a). Charity care and community benefit in non-profit hospitals: Definition and requirements. Inquiry, 58, 469580211028180. 10.1177/00469580211028180 [DOI] [PMC free article] [PubMed] [Google Scholar]
  20. Zare H., Eisenberg M. D., Anderson G. (2021b). Comparing the value of community benefit and tax-exemption in non-profit hospitals. Health Services Research, 57(2), 270–284. 10.1111/1475-6773.13668 [DOI] [PMC free article] [PubMed] [Google Scholar]

Articles from Journal of Healthcare Management are provided here courtesy of Wolters Kluwer Health

RESOURCES