Community Needs Assessment

The Department of the Treasury and the IRS posted a notice of proposed rules related to the implementation of the Community Health Needs Assessment portion of the Patient Protection and Affordable Care Act (“PPACA”). Effective March 23, 2012, 501(c)(3) hospitals will be subject to a $50,000 per year excise tax if they fail to conduct a “Community Health Needs Assessment” (“CHNA”) or if they fail to adopt an implementation plan addressing the needs identified in the CHNA. The new rules describe who must conduct CHNAs, what constitutes a complete CHNA and implementation plan, and the penalty for a failure to complete a CHNA. 

The proposed rules address who must conduct a CHNA. Under proposed section .01, a CHNA must be conducted by any organization that operates a State-licensed hospital facility or any organization the Secretary determines provides hospital care and seeks to be recognized as tax exempt as a 501(c)(3) organization. Section .02 requires every hospital facility individually -- not just hospital organizations -- to complete a CHNA. 

The proposed rules address what must be included in a CHNA. Under proposed section .03, a CHNA must be conducted every 3 taxable years, and must include the following:

1)     a description of the community served;

2)     a description of the process and methods used to conduct the assessment, including sources and dates of data, analytical methods, any gaps in data, other hospital collaborators, and any third party who assisted in conducting the CHNA;

3)     a description of how the hospital took into account input from persons who represent the broad interests of the community including how and when the organization consulted these people, and the name, title, affiliation, and description of any person who was consulted and has special knowledge or expertise in Public Health;

4)     a prioritized description of the community health needs, and the method for prioritizing; and

5)     a description of existing facilities which can address needs identified in the CHNA. 

Under proposed section .04, a CHNA must be conducted in the current taxable year or the two immediately preceding years. Proposed section .05 describes that “community served” means the geographic area, taking into account target populations, including the poor and under-served, and the hospital’s principal functions. When conducting the survey, proposed section .06 requires hospitals to collect information from persons who represent the broad interests of the community including (1) persons with special knowledge or expertise in public health, (2) health departments and other agencies with current health data, and (3) leaders, representatives, or members of medically under-served, low-income, minority populations, and populations with chronic disease. 

Proposed section .07 provides that once a CHNA is completed, the CHNA report must be widely available. This requirement is satisfied by posting the CHNA on the hospital’s website, and providing basic information which labels the document and discusses how to download it. Proposed section .08 provides the implementation strategy requirements. Each hospital facility must develop a plan to meet the needs identified in the CHNA, or state that the hospital does not intend to meet the need and explain why the hospital does not intend to meet the need. Under proposed section .09, an implementation plan is adopted when it is approved by a hospital board or authority. 

The new rules address the penalties for noncompliance and the reporting requirements. Proposed section .10 states the penalty for failure to comply is a $50,000 excise tax for each year the hospital has failed to conduct an assessment in the previous 2 years. For example, a hospital which conducts a survey in 2012, but then does not conduct one in 2015 would be subject to the $50,000 excise tax penalty for 2015, and each subsequent year without an assessment. Proposed section .11 requires hospitals to report on their Form 990 that they have conducted CHNA and have an implementation plan in place. Proposed section .12 makes these rules effective March 23, 2012. 

If you have questions about this article or other health reform law issues, please visit Health Reform Connect, or contact one of our health reform law attorneys, Leigh Ann O’Neill at 317-238-6346.

The PPACA implements new requirements tax-exempt hospitals must meet to maintain tax exemption, and increases the amount of information these hospitals must provide to the IRS and Congress. 

Under the PPACA, a tax-exempt hospital must: (1) conduct a Community Health Needs Assessment once every three years; (2) adopt a financial assistance policy; (3) limit charges for those qualifying for financial assistance; and (4) refrain from extraordinary collection actions before making reasonable efforts to determine whether a patient qualifies for financial assistance.  While all aspects of the new requirements are important, the Community Health Needs Assessment presents perhaps the most exciting opportunities for provider collaboration.

The Community Health Needs Assessment requires each hospital to conduct an assessment every three years and adopt implementation strategies to meet needs that are identified.  The Community Health Needs Assessment requires that a hospital take into account input from persons who represent the broad interests of the community served by the tax-exempt hospital facility, including those with special knowledge or expertise in public health.

This encourages tax-exempt hospitals to partner with other providers in their service area to identify needs and opportunities for serving their collective patient populations.  It also will inevitably facilitate grant opportunities for smaller non-profits without the staff to dedicate to such projects, but which can use the results of the Community Health Needs Assessment to help demonstrate the important role even smaller organizations can play in an overall strategic health plan.

Notably, the Community Health Needs Assessment also presents an ideal opportunity for entities to bolster their property tax exemptions.  The Assessment's cohesive and cooperative story, which is specific to a local community, will be especially meaningful to the representatives making local property tax determinations.

The effective date for the completion of the Community Health Needs Assessment is the taxable year that begins two years after the date of enactment.  A $50,000 penalty will apply to an organization that consistently fails to satisfy the requirement.

If you would like additional information, please contact me at (317) 238-6254 or thutchinson@kdlegal.com.