Data can be sliced a lot of ways, depending on how you want to position something.
For instance, a recent Modern Healthcare article, “The charity offering,” reported that Excela
Health System in Pennsylvania spent only 0.23 percent, or $893,308, of its 2010 expenses on free medical care for low-income patients. That percentage was the lowest in the nation that year.
Yet, the health system is among the approximately 60 percent of private U.S. hospitals that receive tax breaks in exchange for providing community benefits. The value of those tax breaks is estimated between 3 percent and 5 percent of hospital patient revenues. In 2002, those tax breaks amounted to $12 billion.
So, let’s be sure we’ve got this straight. A Pennsylvania hospital spends 0.23 percent of its expenses on free care so that it can receive the equivalent of 3 percent to 5 percent of patient revenues in tax breaks. Sounds like a heck of a deal. No wonder business and community leaders and legislators are more and more often asking hospitals to justify their tax-exempt status because they don’t feel hospitals are paying their fair share.
Now, if we look a little closer at the data, we get a different perspective. Although Excela spent just 0.23 percent of expenses on free care, it spent a total of 6.25 percent of its budget on community benefit. Although free care is a community benefit, it is but one of several community benefits Excela and other nonprofit hospitals provide and recently began itemizing on their annual federal tax forms, known as Form 990. Additional community benefits include such items as medical residency programs, behavioral health care and other community programs.
Form 990 is used to report a public charity’s finances. Those in the nonprofit healthcare world are very familiar with the revised Form 990 and Schedule H. In 2008, the IRS significantly changed the form to require hospitals to detail how much community benefit they provide, from free and unreimbursed care to programs that meet specific community health needs. Then, when the Patient Protection and Affordable Care Act was passed in March 2010, nonprofit hospitals were additionally required to conduct a community health needs assessment and demonstrate an implementation strategy to meet those needs.
But does reporting a list of community benefits as mandated by the IRS do enough to demonstrate how hospitals are meeting a need that might otherwise go unmet and thereby justify their nonprofit status? The answer is no. And when you factor in that approximately 90 percent of tax-exempt hospitals did not spend even 5 percent of their budgets on charity care in 2010, the no is resounding.
Call my data interpretation semantics or hair-splitting. It doesn’t really matter, just like my opinion on whether hospitals are providing enough charity care in exchange for tax breaks doesn’t really matter. But when the opinions of those who do matter – the community a hospital serves, influential business leaders and local, state and federal legislators – begin to question the data, how will hospitals justify their nonprofit status?
A billboard won’t do it. An ad campaign in the local paper won’t do it. A story about how a top heart surgeon provided emergency heart surgery for someone in the community, who, by the way, has no insurance but is now living a happy, healthy and active life, won’t do it, either. Neither will a page or two in an annual report.
Form 990 is a good start. It is an excellent framework for cataloging and describing a health system’s story and the benefit it provides to the community. And it is a microcosm of what healthcare administrators need to communicate today to differentiate and prove themselves.
In the 21st century age of transparency, hospitals are being asked what they’ve done for their community lately. Traditional healthcare brand marketing does not answer the question. The “value propositions” and “differentiators” of years gone by have been replaced by a cacophony of claims, counter claims and general market confusion. The techniques and tactics once thought to create distinction now propagate mush.
Yet there is an ageless alternative for healthcare systems to demonstrate community benefit, justifying their tax exemption and enhancing their market position and distinction. That ageless concept is the story.
With the Affordable Care Act and major changes under way in health care, health system administrators are under much pressure. Proactively telling their “capital S story” – not one of human-interest stories of doctors providing miraculous care (though those have a place) but a Story with broad, deep context that is robust, authentic and useful – may not be a priority. But clearly, regularly and effectively communicating community benefit in an effort to preserve tax-exempt status should be a priority. The thing is, proactively telling the capital S story and regularly and effectively communicating community benefit should be one in the same. Read more about how health systems can do just that.
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Jason Snyder is a senior vice president for WordWrite Communications.
