Existing California law eloquently explains the public expectation for non-profit hospitals:
“Private not-for-profit hospitals meet certain needs of their communities through the provision of essential health care and other services. Public recognition of their unique status has led to favorable tax treatment by the government. In exchange, not-for-profit hospitals assume a social obligation to provide community benefits in the public interest (California Health and Safety Code, Article 2, Section 127340(a)).”
California was ahead of the curve in 1994 when the governor signed SB 697, which amended the Health and Safety Code to establish the process of identifying a not-for-profit hospital’s social obligation by conducting a community needs assessment every three years, and attempting to meet that social obligation by developing and submitting a community benefits plan annually to document progress and the level of resources and investment being made in community needs.
In 2010, the Affordable Care Act created similar, but slightly different responsibilities for not-for-profit hospitals nationwide in documenting community needs and meeting that same social obligation. The ACA requires all private, not-for-profit hospitals (including those exempt from California’s law, like small or rural hospitals) to conduct a community health needs assessment every three years, and report on community benefit activities at least once every three years. In addition, it requires each hospital to adopt and publicize a written financial assistance policy and comply with billing and collection guidelines for those that may qualify for financial assistance.
Two bills currently under consideration by California’s legislature would make changes to state requirements for not-for-profit hospitals. AB 1046 would align California’s existing law with the ACA’s community health needs assessment and community benefit reporting requirements. While the legislation would not impose additional requirements on currently reporting non-profit hospitals, it does require small and rural hospitals to begin reporting, and establishes consistency between state and federal law so that hospitals could more easily comply with both state and federal requirements. AB 1046 would not expand the social obligations of non-profit hospitals in the state, but it would not undermine current expectations either.
The second bill, SB 346, includes more stringent requirements for non-profit hospitals to demonstrate their community benefit and provide proof that they are meeting the social obligation in return for their tax status. In addition, the bill would expand the requirement to include not-for-profit multispecialty clinics.
SB 346, which would be phased in by 2018, requires a specific process for community health needs assessments for both types of providers. SB 346 explicitly calls for community benefit allocations in charity care for the uninsured and underinsured, as well as community building activities. Unlike AB 1046, SB 346 does not attempt to align state-based activities with the ACA’s community health needs assessment and community benefit requirements for not-for-profit hospitals. Instead, it goes above and beyond IRS expectations by extending responsibilities for community health needs assessments and community benefits to non-profit multispecialty clinics, redefining community benefits to include charity care and community building activities, requiring more explicit and transparent reporting of public community benefit allocation and planning activities, and authorizing the Office of Statewide Health Planning and Development to calculate the value of the community benefits provided.
Given recent concerns about executive compensation at not-for-profit hospitals and health plans and whether those not-for-profit organizations are fulfilling their social obligations, there is certainly a need for state and national monitoring of community health needs, charity care provision and community benefit planning.
While AB 1046 would not significantly undermine efforts to require effective community benefit planning, its main purpose is to align with federal law and establish consistent reporting requirements for non-profit hospitals.
SB 346 not only expands the reach of community benefit requirements in the state, but also makes the process more transparent, and establishes stringent requirements focused on providing charity care and engaging in community building for not-for-profit hospitals. While these new requirements may be considered onerous by those operating not-for-profit hospitals and multispecialty clinics, the deadline for compliance is delayed until 2018 and the reporting requirements can still be aligned with ACA deadlines and concepts to ensure consistency and administrative efficiency, either through legislative amendments or during the implementation process.
It seems that both laws could have positive outcomes, and I hope for a compromise to strengthen monitoring and ensure not-for-profit hospitals actually meet their social obligation, while also aligning certain reporting requirements with existing federal law so that they are not overly burdensome or duplicative.