Best Practices for Managing Not-for-Profit Tax Requirements

Best Practices for Managing Not-for-Profit Tax Requirements


Not-for-profit hospital tax exemptions are under fire. Last week published an article on the Illinois 4th District Appellate Court ruling about a 2012 Illinois law that declares what hospitals have to do to achieve tax exemptions is unconstitutional. The law, when passed in 2012, was seen as a huge benefit for not-for-profit hospitals who now had clear standards of how to maintain their tax-exempt status. The case will go to the Illinois Supreme Court for the final ruling.

As cities and states look for additional tax revenues to run city and state budgets, not-for-profit hospitals are a big source of new revenue. Hospitals in Ohio, Pennsylvania, and New Jersey have also faced challenges.

Given this environment, what can hospitals do to maintain their tax exempt status? The Patient Protection and Affordable Care Act (PPACA) enacted in 2010 imposed requirements for 501(c)3 hospitals. These requirements compel hospitals to document provision of community benefits to justify their tax-exempt status. Specifically, hospital must meet four standards:

1)      Develop written financial assistance policies

2)      Limit what they charge for services

3)      Observe fair billing and collection practices

4)      Conduct regular community needs assessments

Managing all four of these requirements can be a tall order for many not-for-profit hospitals, particularly ones feeling the pressure of being over-committed and under-staffed. Using an expert in community health needs assessments as compared to a do-it-yourself (DIY) approach allows hospitals to focus their internal resources on meeting the requirements of the other three standards. Bringing on an expert in measurement and process also leaves room for hospital teams to focus on what they do best, improving the health of the community.

Additionally, internal hospital team are likely pulled in a variety of directions hindering them from taking full advantage of a CHNA process. For example, some hospitals focus more on the hospital and hospital information when assessing community health. This focus will miss many benefits of a true CHNA process. One alternative is to  partner with your public health department to access data hospitals traditionally do not utilize.

Stratasan offers a robust process focused on not only meeting CHNA requirements but also contributing to the strategic vision and positioning of the hospital in the community. Our process has been described by our customers as, “best-practice”, “strategic”, and “beneficial”. Consider partnering with an expert for your next community health needs assessment.


Article by Lee Ann Lambdin, VP of Strategic Resources for Stratasan.

Lee Ann Lambdin is Vice President of Strategic Resources at Stratasan. Lee Ann is responsible for leading the production team, a team of health analysts and GIS specialists who assist customers with marketing and planning intelligence. In addition, Lee Ann is responsible for Stratasan’s expert thinking initiative. Prior to Stratasan Lee Ann held planning leadership roles over the past 20 years in healthcare with systems such as Saint Thomas Health, Brim Healthcare, and Covenant Health.

Blog chna community health healthcare hospital Illinois modern healthcare not-for-profit Supreme Court tax-exempt