In the Nation's Compelling Interest Ensuring Diversity in the Health-Care Workforce (2004) / Chapter Skim
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6 Community Benefit as a Tool for Institutional Reform
6 Community Benefit as a Tool for Institutional Reform
Pages 178-202
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From page 178... ...
This chapter reviews the historical and legal origins of community benefit, the evolution of policies and practices, and the potential application to health professions education and training institutions. HISTORICAL ORIGINS AND LEGAL ANTECEDENTS Community benefit is a legal term that applies to charitable activities that benefit the community as a whole.
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From page 179... ...
(3) nonprofit organizations.7 While the ruling included language that acknowledged the practical limits to the volume of charitable services that could be provided by nonprofit hospitals,8 only services to the poor would qualify the organization for tax exemption.
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From page 180... ...
In promulgating this alternative standard for granting tax exemption to hospitals, the IRS created a controversy that has now lasted over 30 years over the issue of what exactly is expected of a nonprofit hospital to meet the "community benefit standard." It is important to note that this ruling was issued 4 years after the passage of the Medicare/Medicaid Act of 1965. Some have suggested that these events contributed to an impression among government officials that problems of access for the medically indigent would be solved in the near future, and hence it would be appropriate to broaden the criteria for charitable purposes (Fox and Schaffer, 1991)
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From page 181... ...
Ruling 83-157 indicated "nonprofit hospitals are not required to operate an emergency room where a state or local health planning agency has found that this would unnecessarily duplicate emergency services and facilities that are adequately provided by another medical institution in the community."16 The community benefit standard for nonprofit organizations, established with 69-545 and reaffirmed with 83-157, provided an important backdrop for the U.S. Supreme Court's 1983 decision in Bob Jones University v.
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From page 182... ...
Requirements include an annual review of the hospital mission statement, publication of hospital assets and liabilities, an assessment of community needs and hospital strategies to address them, and the solicitation of input from community stakeholders.19 In the same year, the Utah State Tax Commission issued a set of formal guidelines for nonprofit hospitals and nursing homes that included a requirement for a minimum financial threshold of contributions that exceed the annual property tax liability of each facility.20 Categories of sanctioned contributions included care to the medically indigent, community education and service, medical discounts, and donations of time and money. These legal requirements were a direct outgrowth of the 1985 challenge to the tax exemption of Intermountain Healthcare.
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From page 183... ...
. Finally, eight of the eleven states specifically identify unreimbursed costs of health professional training and research as reportable community benefit activities; three do not (ID, MD, WV)
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From page 184... ...
First, it indicates that charity care is an important part of a hospital's community benefit contributions, beyond simply the operation of an emergency room. Second, it indicates that it is insufficient simply to state that hospitals have established policies that ensure access for the medically indigent; that a hospital "must show that it actually provided significant health services to the indigent."32 This action provided validation of recent efforts by consumer advocates to increase the volume of charity care provided by nonprofit hospitals, particularly in states with high numbers of medically indigent.
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From page 185... ...
. In Michigan, the FTC imposed a Consent Decree in 1996 as a condition for a merger of two nonprofit hospitals that limited price increases and established an annual minimum financial threshold for community benefit contributions.35 Examples of institutional practices that have provided the impetus for regulatory activism range from aggressive bill collections among medically indigent populations to the use of surplus revenues for purposes other than improving the quality of services and facilities.
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From page 186... ...
EVOLUTION OF POLICIES AND PRACTICES The implementation of state community benefit initiatives provides important lessons for the potential application of community benefit principles to institutions engaged in health professions education and training. Insights can also be gleaned from the implementation of private sector initiatives that have sought to enhance the community benefit practices of nonprofit hospitals.
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From page 187... ...
In New Hampshire, the enactment of SB 69 in January 2000 was accompanied by the parallel funding of a statewide health planning process by the state legislature.39 The health planning process focused primarily on the assessment of health-care needs and the development of strategies to increase access to health care, but it also included funding for a series of 36"Not-for-Profit Hospital Community Benefit Legislation (SB 697) Report to the Legislature," January 1998, Office of Statewide Health Planning and Development, California Health and Welfare Agency.
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From page 188... ...
Until recently, the implementation of community benefit statutes at the state level has been a relatively benign process with submissions of annual reports and a cursory review by state monitoring agencies. Federal funding of state programs to increase coverage for children and families in the 1990s produced measurable gains42 and may have reduced pressure for 40 Grant from the NH Endowment for Health to the Community Health Institute, in partnership with the Office of Planning and Research, NH Department of Health and Human Services to conduct a statewide study of community benefit reports submitted in compliance with Senate Bill 69.
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From page 189... ...
Given the current fiscal crisis in many states, passage of a community benefit statute with minimum financial thresholds may be viewed by some policy makers as a low-risk alternative to taking on the problem of access to health care in a more systematic manner. A coalition of consumer advocates and organized labor groups recently collaborated with policy makers in California to propose minimum financial thresholds of charity care for nonprofit hospitals.
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From page 190... ...
. The Public Trust Model outlines six public expectations associated with tax exemption, including: 1.
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From page 191... ...
The Community Health perspective draws its strength from the proposition that the demand for high-cost medical care can be substantially reduced by targeted provision of preventive services and the promotion of health in local communities. For nonprofit hospitals, this approach often represents an effort to reduce hospitalizations and emergency room utilization for preventable illnesses.
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From page 192... ...
For this reason, it is difficult, if not inappropriate, to judge the charitable intent of nonprofit hospitals (and other institutions that receive public funding) based upon a single standard such as the volume of free medical care provided to medically indigent populations.
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From page 193... ...
A recent study of hospital community benefit practices in California (Rundall, 1994) identified four common elements among exemplary programs: · Clear targeting of community benefit activities to serve communities with disproportionate unmet health-related needs · Meaningful engagement of diverse community stakeholders · Strategic allocation of charitable resources to build on existing community assets · Alignment of organizational governance, management, and operational functions with the charitable mission of the organization In the best cases, nonprofit hospitals have increased the diversity of their governance structures to reflect more clearly the diversity of local communities, established interdepartmental performance measures to increase the accountability of leadership and staff, hired dedicated staff with appropriate competencies to support an ongoing process of quality improvement, and shielded community benefit decision-making processes from marketing and business development imperatives.
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From page 194... ...
More particularly, because the origins of the community benefit principles flow from the arena of income tax exemption, it is logical to first ask: Is there a legal obligation tied to the grant of tax-exempt status that obligates nonprofit hospitals, colleges, and universities to advance workforce diversity goals? The simple answer is probably not.
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From page 195... ...
A review of Revenue Rulings 69-545 and 83-157 indicates no references to the educational mission or function of hospitals; their focus is on the operational characteristics of hospitals tied to patient care.45 Certainly, under the Internal Revenue Code, hospitals could not remain tax exempt while practicing overt racial discrimination tied to patient care or employment.46 However, absent such overt discrimination, even in the patient care context, there do not appear to be affirmative expectations that hospitals make their patient care environments more welcoming to persons of color in order to remain tax exempt. Even in the face of growing concern over health disparities confronting our nation, or in dealing with the reality of a more diverse patient populations, to date there has not been any hint that the grant of tax exemption will be tied to hospital efforts to address language barriers for non-English speaking patients,47 provide needed cultural competency training of staff, and/or recruit and retain a more diverse cadre of provider staff.
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From page 196... ...
While the IRS memorandum seems to do that with respect to charity care and related policies, it also suggests that the IRS could further try to add some specificity to a hospital's "promotion of health" obligations by requiring it to address issues such as workforce diversity and racial and/or ethnic health disparities as a key factor to maintain taxexempt status. Establishing such explicit requirements, however, would represent a radical departure from the historical practices of the IRS in this arena.
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PUBLIC POLICY OPTIONS: PRECEDENTS, OPPORTUNITIES, AND PITFALLS From a public policy perspective, it is clear that health professionals training schools and hospital based training programs have made only limited progress in advancing workforce racial and ethnic diversity goals in the United States. Though community benefit principles offer an attractive framework for holding health professionals training programs and their institutional sponsors accountable for advancing goals tied to racial and ethnic diversity of their students and trainees, from a legal perspective, it is important that the principles be applied in the most effective venue.
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From page 198... ...
For public teaching hospitals, colleges, and universities, a community benefit standard aimed at advancing racial and ethnic diversity tied to tax exemption would have no impact on such governmental organizations, as they derive their exempt status as being units of government. In fact, reliance upon tax exemption as a framework for accountability could have the consequence of placing more legal expectations for advancing diversity goals on private, nonprofit institutions than on institutions that receive direct governmental subsidies as public entities.
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From page 199... ...
In the most basic sense, community benefit principles provide insights for the public expectations of both nonprofit health-care providers and institutions that train these providers. Just as nonprofit hospitals are expected to play a role in addressing priority unmet needs in local communities, health professions schools can appropriately be expected to play a direct role in responding to priority unmet health needs at the local and/or societal level.
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From page 200... ...
We think that it is time for those entities that maintain significant leverage over health professionals schools and training programs to exercise those incentives. The committee offers three core recommendations to encourage definitive action by academic medical centers and health professions education institutions in support of the societal imperative to increase the diversity of the health-care workforce.
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2000. Measuring community benefits provided by for-profit and nonprofit hospitals.
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St. Louis: The Catholic Health Association of the United States; Washington, DC: Lewin/ICF.
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