Stay IRS Compliant and Improve the Health of Your Community
The August 17th issue of Becker’s Hospital CFO Report details how the IRS has revoked an unnamed hospital’s tax exempt status for failing to conduct a community health needs assessment (CHNA), adopt an implementation strategy, and make it widely available to the public. This punishment is beyond the standard $50,000 excise tax penalty typically issued for failure to meet the CHNA requirements. The article states the IRS referred to "egregious failures when reviewed in the context of [section] 501(r)."
When asked why they failed to fulfill the CHNA expectations, officials at the small rural hospital said they lacked the staffing to comply with 501(r) requirements. While this is the first revocation of tax exempt status that I’m aware of, I know that having your tax exempt status revoked can financially devastate a hospital.
Becker’s reports, “The IRS noted a revenue agent met with the hospital's CEO, CFO, and COO during the audit and the administrators made it clear that the organization ‘had neither the will, the financial resources, nor the staff to follow through with the CHNA process.’”
Having personally completed over 50 CHNAs, many for small and critical access hospitals, I can share with confidence that they are not the complicated, expensive undertaking some have articulated. From start to finish, the process takes around three months depending on the services selected.
Performing a Community Health Needs Assessment (CHNA) is more than just a practice required by law for most hospitals. When the implementation plan is executed well, it can improve the health of your community.
CHNAs provide so much beneficial information that one of the nation’s largest for-profit hospitals has brought on Stratasan to execute 17 CHNAs on their behalf. These CHNAs will benefit their community outreach and population health initiatives.
Hospitals need not be afraid of the process, embrace it as a way to further become an integral part of your community and lead the way in creating a culture of health.
A hospital that doesn’t have the internal resources needed to meet the IRS requirements can still complete the process by hiring an outside resource for a reasonable price. Once you’ve met the IRS requirements, here are a few more things you should remember to do:
- Make sure your CHNA is easily available on your website along with your implementation plan.
- Confirm you are compliant with the other 501(r) regulations, adopting and making public a financial assistance policy, and limiting the amounts charged to people who are eligible for financial assistance.
A CHNA is required by law for every 501(c)3 hospital. Failure to comply can lead to devastating consequences for your organization. If you know your team is not equipped to follow through with the CHNA process, then an outside partner is likely your best option for completing the process and staying compliant with the IRS.
As you consider the time, resources, and expense involved with executing a CHNA, remember that when a CHNA assessment is executed well, it can also improve your ability to better serve your community by:
- Providing in-depth patient demographics which guide your health system in how best to grow, change, and appropriately serve your population
- Examining the psychographics and spending habits of your community making you better equipped to develop marketing promotions that can appropriately speak to their needs
- Identifying the resources available within your service area for partnership and collaboration in an effort to reach and address the needs of the community
Contact Stratasan for more information about we can help you execute a CHNA that can benefit your hospital in many ways for years to come. You can reach out to me, Lee Ann Lambdin, directly for more information 866-628-5051 x 706.
Article by Lee Ann Lambdin, VP of Strategic Resources for Stratasan
Source: IRS revokes hospital's tax-exempt status for failure to comply with ACA rule