How a proposed bill could impact nonprofit hospital spending, reporting toward ‘community benefits’
What community benefit looks like in Eagle County through Vail Health and its partners
Colorado legislators are working on a bill that could create new reporting requirements and rules around how nonprofit hospitals — of which Vail Health is one — spend toward and report “community benefit.”
“When we talk about community benefit, most hospitals in the United States operate as nonprofits, and as such are exempt from most federal, state and local taxes. This exemption is intended to be an acknowledgment of the community benefit that’s provided by the nonprofit institutions, in this case, the hospitals,” said Nico Brown, Vail Health’s chief strategy officer.
According to the bill text, these exemptions “save Colorado’s nonprofit hospitals millions of dollars of tax liability each year.”
Currently, these community benefit requirements are overseen by the Internal Revenue Service, which doesn’t specify how hospitals need to spend toward “community benefit” but does manage related requirements around how hospitals provide and account for this term.
The term “community benefit” has a broad and ever-changing scope, but generally speaks to programs and activities that respond to community needs.
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“Historically, the vast majority of community benefit spending by hospitals has been related to charity care; and what we mean by that is providing patient care services for free or at a reduced charge. And that holds true today,” Brown said, adding that this scope has expanded at the federal level over the years.
A Colorado Health Association report on hospital community benefit spending reported that Colorado hospitals “directly invested more than $1.9 billion into the health and well-being of their communities” in 2021. A January 2023 report from the Colorado Department of Health Care Policy and Financing, reported that Colorado hospitals invested “$965 million in community benefits in 2020-21, not including Medicaid shortfall.”
“While these contributions are significant, Colorado’s nonprofit, tax-exempt hospitals and hospital systems remain profitable and have built significant reserves,” reads the Colorado department’s report, before giving recommendations to the state general assembly to “improve the state’s understanding of where the community dollars were actually invested while increasing hospitals’ transparency and accountability to their communities going forward.”
What would this bill do?
The bill — House Bill 1243 — was introduced in March and underwent a number of amendments in the House Public and Behavioral Health and Human Services committee. On Monday, April 10, the House advanced the bill on a “preliminary vote.”
The overall goal of the proposed legislation is to strengthen accountability on how nonprofit hospitals spend, and add requirements around incorporating feedback from the community into hospitals’ evaluation of community needs. It would also, as currently written, restrict the amount of out-of-state spending that can be counted as “community benefit” spending.
“By strengthening accountability for how hospitals spend resources in the community and requiring them to incorporate more feedback, we can ensure these investments reduce costs for consumers, increase access to critical services and improve public health,” said Rep. Judy Amabile, one of the bill’s sponsors in an April 10 press release.
The April 10 version of the bill does several things. It creates requirements around each hospital’s community implementation plans, creating rules around the annual meeting to present its proposed plan — including who’s invited, how the meeting should be posted, what to report and solicit feedback for. It also sets requirements on the state’s reporting of this, sets compliance rules, as well as creates requirements around community health needs assessments, implementation plans, reports and rules.
The proposed House bill would seek to add certain categories to required community benefit spending and reporting. Most significantly, it would add behavioral health and community-based health care as categories.
Other categories that hospitals would be required to identify investments into (if applicable to community needs) include free or discounted health care services, social determinants of health spending as well as spending around housing, food, transportation, interpersonal violence, education, and more.
Among the amendments made by the House committee were significant changes to requirements on how many hospitals spend toward these categories.
The introduced version of the bill proposed requirements on the specific investments nonprofit hospitals would be required to make. It had proposed a requirement that each nonprofit hospital spend at least 3% of its revenue from treating patients on community benefit unless its federal and state tax exemptions are worth less than that. Gradually, this target would increase to 5% of patient revenue over time.
However, the committee voted to strike this language from the bill text as it heads to the House.
How does Vail Health evaluate community needs?
Vail Health, as part of the IRS regulatory requirements for nonprofit hospitals, completes a Community Health Needs Assessment every three years. The most recent report was released in October 2022.
Generally speaking, Brown said the report “identifies the gaps that we have here, it identifies — to granular levels — what we can do, what we are doing, and how we’re going to address those gaps.”
Vail Health’s assessment not only looks at population health-related data — including demographic, economic and social indicators of health — but also facilitates with community partners and focus groups to solicit feedback and identify needs.
“It’s not something that we come up with in a vacuum,” Brown said.
The 2022 report names 42 community partners — from statewide agencies to local organizations like The Community Market, Vail Valley Foundation and its subsidiaries like Howard Head Sports Medicine and Vail Health Behavioral Health.
The report not only looks at the previous 2019 Community Health Needs Assessment Implementation plan — including the identified priorities and how Vail Health and its partners addressed these areas — but also details the needs assessment looking ahead. This defines the population Vail Health serves, and identifies priority areas and strategies to address those priorities.
In 2022, eight areas were identified as priorities for Vail Health.
“When we kind of break them down, they align with engaging, enrolling and connecting people to whole person health,” Brown said. “What we mean (with whole person health) is there is physical health and behavioral health, and making sure that that’s integrated in a comprehensive care model and bringing care to the people.”
This includes focusing on things like “prevention, early intervention, increasing the utilization of healthy foods, addressing our health care staffing shortages with a focus on increased diversity, increasing early childhood and family supports, improving system interoperability and integration as well as advancing policy to improve community health access to care, lower costs and driving engagement.”
All these priorities feed into how Vail Health spends to “community benefit.”
How does Vail Health invest in community benefits?
“In the last five years, we spent over $115,000,000 in community benefit, and that’s spent in a number of different ways,” Brown said.
According to Vail Health, it reported $253.4 million in total operating revenue in 2021. In the same year, it reportedly gave $25.1 million back to the community through a variety of local initiatives.
The Colorado Department of Health Care Policy and Financing’s January 2023 Hospital Community Benefit Accountability report compiled community investments relating to the IRS forms for the 2020 fiscal year.
In this, it reported that Vail Health invested a total of $15,099,721 in community benefits in the fiscal year 2020. Of this, $2,733,011 was on free or discounted services, $262,837 on health behaviors, $264,645 on social determinants of health and $11,839,228 on other community-identified needs.
In the accountability report, the hospital is also called out in its compliance section regarding public meetings, stating that, “Community Hospital and Vail Health Hospital did not invite the Department to their public meetings, which was not compliant with the legislation.”
“When we think of the No. 1 thing, right now, that we’re investing in a lot is behavioral health and really building that community, but there’s also a number of other places that we are investing,” Brown said.
Vail Health later told the Vail Daily that the community benefit that received the largest percentage of funding was “subsidizing less profitable health care services that help improve the overall health of our community like behavioral health, specialty care and our cardiac catheterization lab.”
Further, it said that some specific examples of how it spends toward community benefit include:
- Charity care for those that cannot afford to pay for their care
- Behavioral health
- Medical research
- Lifesaving and life-improving health care services that are not profitable (cardiac catheterization lab, specialty care)
- Subsidized care for our uninsured and underinsured
- Community outreach like ThinkFirst (helmet and seatbelt education in schools), Sun Safety (skin cancer education in schools), high school athlete physicals, health fairs, Camp 911, etc.
- Health lifestyle and community partnerships like the Vail RecDistrict Bike/Running Series, Gypsum Days, Wild West Days, High School Booster Clubs, The Cycle Effect
Will the bill impact this spending?
Whether the bill will impact Vail Health’s community benefit spending and reporting is still to-be-determined, Brown said.
“It’s a fluid situation. We embrace the dialogue. We’ll want to thank our teams that are doing this work, that are part of this: our community members, our stakeholders, our elected officials, and just know that it needs to be a collaboration. The way in which we continue to improve and live out all of our missions is through that dialogue and leaning in,” Brown said.
“The devil’s in the details in these sorts of things,” he added. “When you think about legislation as one thing and then rulemaking as another; that’s where a lot of the granularity comes into play.”
“On the whole, I would like to see that communities and systems can all come together and find and identify what those gaps and the needs are and let’s address them proactively,” Brown said. “I would love to see more of our communities step forward and work collaboratively like we have in behavioral health, because that’s just such a need throughout all of Colorado, really in the entirety of the United States?”
All of which is to say, “We’re committed to our mission and that’s where we will remain,” Brown said.