In addition to the
general requirements for tax exemption under Section 501(c)(3) and
Revenue Ruling 69-545PDF, hospital organizations must meet the
requirements imposed by Section 501(r) on a facility-by-facility basis in order to be treated as an organization
described in Section 501(c)(3). These additional requirements are: Section 501(r)(3)(A) requires a hospital organization to conduct a community health needs assessment (CHNA) every three years and to adopt an implementation strategy
to meet the community health needs identified through the CHNA. Section 501(r)(3)(B) provides that the CHNA must: A hospital organization meets the requirements of Section 501(r)(3) with respect to a
hospital facility it operates: To conduct a CHNA, a hospital facility must complete
the following steps: A hospital facility is considered to have conducted a CHNA on the date it has completed all of these steps, including making the CHNA report widely available to the public. A hospital facility may take into account all the relevant facts and circumstances in defining the community it serves. This includes: However, a hospital facility may not define its community in a way that excludes medically underserved, low-income, or minority populations who live in the geographic areas from which it draws its patients (unless such populations are not part of the hospital facility’s target population or affected by its principal functions) or otherwise
should be included based on the method the hospital facility uses to define its community. Medically underserved populations include populations experiencing health disparities or that are at risk of not receiving adequate medical care because of being uninsured or underinsured, or due to geographic, language, financial, or other barriers. Populations with language barriers include those with limited English proficiency. Medically underserved populations also include those living
within a hospital facility’s service area but not receiving adequate medical care from the facility because of cost, transportation difficulties, stigma, or other barriers. Additionally, in determining its patient populations for purposes of defining its community, a hospital facility must take into account all patients without regard to whether (or how much) they or their insurers pay for the care received or whether they are eligible for assistance under the hospital facility’s financial assistance policy. If a hospital facility consists of multiple buildings that operate under a single state license and serve different geographic areas or populations, the community served by the hospital facility is the aggregate of these areas or populations. Assessing Community Health NeedsTo assess the health needs of its community, a hospital facility must identify the significant health needs of the community. It must also prioritize those health needs, as well as identify resources potentially available to address them. Resources can include organizations, facilities, and programs in the community, including those of the hospital facility, potentially available to address those health needs. The health needs of a community include requisites for the improvement or maintenance of health status both in the community at large and in particular parts of the community, such as particular neighborhoods or populations experiencing health disparities. Needs may include, for example, the need to:
A hospital facility may determine whether a health need is significant based on all the facts and circumstances present in the community it serves. Additionally, a hospital facility may use any criteria to prioritize the significant health needs it identifies, including, but not limited to the:
Input Representing the Broad Interests of the CommunityA hospital must both solicit and take into account input received from all of the following sources in identifying and prioritizing significant health needs and in identifying resources potentially available to address those health needs.
Additional Sources of InputIn addition to soliciting input from the three required sources, a hospital facility may solicit and take into account input received from a broad range of persons located in or serving its community. This includes, but is not limited to:
Although a hospital facility is not required to solicit input from additional persons, it must take into account input received from any person in the form of written comments on the most recently conducted CHNA or most recently adopted implementation strategy. Documentation of a CHNAA hospital facility must document its CHNA in a report that is adopted by an authorized body of the hospital facility. The CHNA report must include the following items.
A CHNA report will be considered to describe the process and methods used to conduct the CHNA report if it:
A hospital facility may rely on (and the CHNA report may describe) external source material in conducting its CHNA. In such cases, the hospital facility may simply cite the source material rather than describe the methods of collecting the data. A hospital facility’s CHNA report must describe how the hospital facility took into account input received from persons who represent the broad interests of the community it serves. The CHNA report should:
However, a CHNA report does not need to name or otherwise individually identify any individuals providing input on the CHNA, including individuals participating in community forums, focus groups, survey samples, or similar groups. If a hospital facility solicits, but cannot obtain, input from a required source representing the broad interests of the community, the hospital facility’s CHNA report must describe the hospital facility’s efforts to solicit the input from such source. Collaboration on CHNA ReportsA hospital facility is permitted to conduct its CHNA in collaboration with other organizations and facilities. This includes related and unrelated hospital organizations and facilities, for-profit and government hospitals, governmental departments, and nonprofit organizations. In general, every hospital facility must document its CHNA in a separate CHNA report unless it adopts a joint CHNA report. However, if a hospital facility is collaborating with other facilities and organizations in conducting its CHNA, or if another organization has conducted a CHNA for all or part of the hospital facility’s community, portions of a hospital facility’s CHNA report may be substantively identical to portions of the CHNA reports of a collaborating hospital facility or other organization conducting a CHNA, if appropriate under the facts and circumstances. If two hospital facilities with overlapping, but not identical, communities collaborate in conducting a CHNA, the portions of each hospital facility’s CHNA report relevant to the shared areas of their communities might be identical. So, hospital facilities with different communities, including general and specialized hospitals, may collaborate and adopt substantively identical CHNA reports to the extent appropriate. However, the CHNA reports of collaborating hospital facilities should differ to reflect any material differences in the communities served by those hospital facilities. Additionally, if a governmental public health department has conducted a CHNA for all or part of a hospital facility’s community, portions of the hospital facility’s CHNA report may be substantively identical to those portions of the health department’s CHNA report that address the hospital facility’s community. Collaborating hospital facilities may produce a joint CHNA report as long as all of the collaborating hospital facilities define their community to be the same and the joint CHNA report contains all of the same basic information that separate CHNA reports must contain. Additionally, the joint CHNA report must be clearly identified as applying to the hospital facility. CHNA Report: Widely AvailableA hospital facility must make its CHNA report widely available to the public. This must be done by making the CHNA report widely available on a Web site and by making a paper copy of the CHNA report available for public inspection upon request and without charge at the hospital facility. Prior CHNA reports must remain widely available to the public, both on a Web site and in paper, until the hospital facility has made two subsequent CHNA reports widely available to the public. Implementation StrategyA hospital facility’s implementation strategy must be a written plan that, for each significant health need identified, either:
Although an implementation strategy must consider all of the significant health needs identified through a hospital facility’s CHNA, the implementation strategy is not limited to considering only those health needs and may describe activities to address health needs that the hospital facility identifies in other ways. Addressing a Significant Health NeedIn describing how a hospital facility plans to address a significant health need identified through the CHNA, the implementation strategy must:
Not Addressing a Significant Health NeedIf the hospital facility does not intend to address a significant health need, providing a brief explanation of its reason for not addressing the health need is sufficient. Reasons for not addressing a significant health need may include, but are not limited to:
Joint Implementation StrategiesAs with the CHNA report, a hospital facility may develop an implementation strategy in collaboration with other hospital facilities or other organizations. This includes, but is not limited to related and unrelated hospital organizations and facilities, for-profit and government hospitals, governmental departments, and nonprofit organizations. In general, a hospital facility that collaborates with other facilities or organizations in developing its implementation strategy must still document its implementation strategy in a separate written plan that is tailored to the particular hospital facility, taking into account its specific resources. However, a hospital facility that adopts a joint CHNA report may also adopt a joint implementation strategy. With respect to each significant health need identified through the joint CHNA, the joint implementation strategy must either describes how one or more of the collaborating facilities or organizations plan to address the health need, or identify the health need as one the collaborating facilities or organizations do not intend to address. It must also explain why they do not intend to address the health need. A joint implementation strategy adopted for the hospital facility must also:
Adoption of Implementation StrategyAn authorized body of the hospital facility must adopt the implementation strategy. See the discussion of the Financial Assistance Policy below for the definition of an authorized body.
Acquired FacilitiesA hospital organization that acquires a hospital facility (through merger or acquisition) must meet the requirements of Section 501(r)(3) with respect to the acquired hospital facility by the last day of the organization’s second taxable year beginning after the date on which the hospital facility was acquired. In the case of a merger that results in the liquidation of one organization and survival of another, the hospital facilities formerly operated by the liquidated organization will be considered “acquired,” meaning they will have until the last day of the second taxable year beginning after the date of the merger to meet the CHNA requirements. Thus, the final regulations treat mergers equivalently to acquisitions. New Hospital OrganizationsAn organization that becomes newly subject to the requirements of Section 501(r) because it is recognized as described in Section 501(c)(3) and is operating a hospital facility must meet the requirements of Section 501(r)(3) with respect to any hospital facility by the last day of the second taxable year beginning after the latter of:
New Hospital FacilitiesA hospital organization must meet the requirements of Section 501(r)(3), with respect to a new hospital facility it operates by the last day of the second taxable year beginning after the date the facility was licensed, registered, or similarly recognized by its state as a hospital. Transferred/Terminated FacilitiesA hospital organization is not required to meet the requirements of Section 501(r)(3) with respect to a hospital facility in a taxable year if the hospital organization transfers all ownership of the hospital facility to another organization or otherwise ceases its operation of the hospital facility before the end of the taxable year. The same rule applies if the hospital facility ceases to be licensed, registered, or similarly recognized as a hospital by a state during the taxable year. By extension, a government hospital organization that voluntarily terminates its Section 501(c)(3) recognition as described in Rev. Proc. 2018–5 (updated annually) is no longer considered a hospital organization for purposes of Section 501(r) and therefore is not required to meet the CHNA
requirements during the taxable year of its termination. How are profits used in a forHow are profits used in a for-profit health care organization? Profits are paid out to shareholders.
Which of the following organizations must follow GASB standards?Which of the following organizations must follow GASB standards? Governmental Health Care Organizations.
What are the financial statements required for all nongovernmental notWhat are the financial statements required for all nongovernmental, not-for-profit organizations? D. Statement of Financial Position, Statement of Activities, Statement of Cash Flows.
Where does a nongovernmental notWhere does a nongovernmental not-for-profit health care entity report increases that have occurred in its net assets with donor restrictions? Statement of operations. Balance sheet. Similar to governmental health care entities, it would not report the change on the face of a financial statement.
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