Title: Community Benefit: What Counts
1Community Benefit What Counts How to
Count
1230 pm session
2Basic Steps in Community Benefit Planning and
Implementation
Determining What Counts
Building a Sustainable Infrastructure
Interrelated Interdependent Simultaneous
Accounting For Costs
Planning
Evaluating
Communicating
3Definition
- Community benefits are programs or activities
that provide treatment and/or promote health and
healing as a response to identified community
needs. They are not provided for marketing
purposes and must meet at least one of the
following criteria - Generate a low or negative margin
- Respond to needs of special populations
- Supply services or programs that would likely
be discontinued (or would need to be provided by
another not-for-profit or government provider)
if the decision were made on a purely financial
basis - Respond to public health needs
- Involve education or research that improves
overall community health
4Community Benefit Categories
- Charity care
- Government-sponsored indigent health care
unpaid costs of (means tested) public programs - Medicaid
- State Childrens Health Insurance Program
- Medically indigent programs
- Community Benefit Services (Categories A
G)
5Community Benefit Categories
- A. Community Health Improvement Services
- Community Health Education
- Lectures, presentations, support groups,
self-help programs if open to the public - Community-based Clinical Services
- Screenings, one-time or occasionally held
clinics - Free clinics, mobile units
- Health Care Support Services
- Enrollment assistance in public programs
- Information and referral
- Transportation programs
6Community Benefit Categories
- B. Health Professions Education
- Physicians/medical students
- Nurses/nursing students
- Other health professional education
- Internships for pastoral care, social service,
dietary, other - Medical translator training
- Job shadowing, mentoring projects
- Scholarships/funding for professional
education
7Community Benefit Categories
- C. Subsidized Health Services
- Emergency and trauma services
- Neonatal intensive care (if subsidized)
- Hospital outpatient services
- Burn unit
- Womans and childrens services
- Renal dialysis services
- Subsidized continuing care
- Behavioral health services
- Palliative care
8Community Benefit Categories
- D. Research
- Clinical research
- Community health research
- Innovative health care delivery models
- E. Financial Contributions
- Cash donations
- Grants
- In-kind donations
- Cost of fund raising for community programs
9Community Benefit Categories
- F. Community Building Activities
- Physical improvements/housing
- Economic development
- Community support
- Environmental improvements
- Leadership training for community
- Coalition building
- Community health improvement advocacy
- Workforce enhancement
10Community Benefit Categories
- G. Community Benefit Operations
- Dedicated staff
- Community health needs/health assets
assessments - Other resources
11Criteria for What Counts
- Does the activity address an identified
community need? - Does the activity support an organizations
community-based mission? - Is the activity designed to improve health?
- Does the activity produce a measurable
community benefit? - Is it of a questionable nature that, if
reported as community benefit, could jeopardize
the creditability of your community benefit
report? - Does an activity require subsidization creating
a net financial loss after applying grants and
other supplemental revenue? - Is the activity accessible to uninsured and
low-income people? Do these people comprise a
comparatively large proportion of those served? - Does the activity relieve government of a
burden?
12Do Not Count
- What is not counted and reported as community
benefit? - Bad debt
- Medicare shortfall
- Contractual allowances
- Programs designed to benefit the organization
- Marketing
- HR
13What Counts E-mail Hotline
If you have a question about whether a program
should count as community benefit, use this
resource. The What Counts E-mail Hotline at
www.chausa.org/whatcounts
14Basic Steps in Community Benefit Planning and
Implementation
Determining What Counts
Building a Sustainable Infrastructure
Interrelated Interdependent Simultaneous
Accounting For Costs
Planning
Evaluating
Communicating
15Accounting for Community Benefit
- Accounting principles and approaches
- Issues considered in new Guide
- Walk-through of accounting guidelines in A Guide
for Planning and Reporting Community Benefit - Additional topics
- Value of exemption
- Community Benefits in the Spotlight seven
recommendations - Role of finance in community benefit
16Accounting Principles and Approaches
- There is great value in standardizing community
benefit accounting practices - Allows organizations reliably to assess
activities over time - Improves comparability across organizations
- Allows health care systems to consolidate or
roll up community benefit amounts - Improves acceptance of reported numbers, both
internally and externally
17Accounting Principles and Approaches
- Current Disparities in Community Benefit
Accounting - Charity care
- Charges or costs?
- Medicaid allowances included?
- Who qualifies for financial assistance?
- Medicare in or out?
- What counts
- Subsidized health services
- Community health services
18Accounting Principles and Approaches
- Medicare Arguments to Keep it Out
- Serving Medicare patients does not differentiate
tax-exempt organizations - Specific programs for the Medicare population can
be counted in subsidized health services - Including Medicare not well received by federal
policy makers - Medicare losses inefficiency?
- If, at some point, access problems emerge for
Medicare patients due to below-cost
reimbursement, the rationale for including
Medicare services as community benefit increases
19Accounting Principles and Approaches
- Key concepts
- Avoid double-counting
- Rely on cost accounting systems, if available and
if well maintained - Disclose accounting methods in community benefit
reports - Maintain an audit trail
- When rolling up numbers as a system, offset gains
against losses - If in doubt, be conservative
20Issues Considered in New Guide
- Methodology for establishing the cost of charity
care - Use cost accounting information for self-pay
patients as proxy for charity care costs? - Overall RCC (overall cost to charge ratio)?
- How to adjust RCC to avoid double counting?
- Impact of bad debts on RCC calculation
21Issues Considered in New Guide
- What counts as charity care
- Use of estimates
- When accounts can be classified as charity
- Alignment with new (draft) HFMA Principles and
Practices Board Statement 15 and AICPA guidance
22Issues Considered in New Guide
- Treatment of foundation-supported programs
- Related versus Unrelated
- Restricted versus Unrestricted resources
- Accounting for DSH and provider taxes
- Measuring indirect cost
- Other issues
- Payments in lieu of taxes (PILOTs)
- How to differentiate marketing versus community
benefit services - Involvement of exempt (salaried) employees in
community service
23Issues Considered in New Guide
- Accounting for Subsidized Health Services
- Include or exclude Medicaid and charity care
shortfalls as part of Subsidized Health Services - Accounting for medical education
- Medicare Indirect Medical Education
reimbursement and cost - Medicaid GME reimbursement
24Accounting Guidelines Section 1
- Adopt Standardized Methods and Policies to
Account for Community Benefits - Establish a reliable administrative process
- Account for total and net community benefit
expenses - Predominantly for persons living in poverty
- Primarily for the broader community
- Use a consistent, cost-based accounting method
- Account for indirect and direct costs
- Offset support provided by unrelated entities
- Establish effective financial assistance policies
- Report community benefit on IRS Form 990
25Financial Assistance Policies
- The Guide highlights several principles
- Consider community need (and hospital financial
health) when establishing policies - Policies should be clear and visible
- Grant charity care/discounts as early as possible
(preferably at or before time of service and
before patient bills are transmitted) - Determinations can be made at any time during the
revenue cycle, but once a write-off decision is
made, that decision should not be reversed - Documentation should be maintained in patient
records - Patients should be informed regarding decisions
as soon as possible
Except in states where charity care policies are
regulated, substantial variation exists in who
qualifies for financial assistance and the amount
of assistance they receive
26Consider the CDM when establishing discounts
for uninsured (under insured) patients
In California, the average nonprofit hospitals
charges were 340 percent of cost in 2004
Charge Description Master
27Discounts Offered In Relation to Cost or Average
Payment Rates
Discount Levels
28Accounting Guidelines Section 2
- Account for Community Benefits
- Cost of charity care
- Unpaid cost of public programs (Medicaid and
others) - Net cost of community health services
- Net cost of health professions education
- Net cost of subsidized health services
- Costs of unsponsored research
- Financial contributions
- Value of community-building activities
- Cost of community benefit operations
29Summary of Quantifiable Community Benefits
30Ratio of Cost to Charge
31Cost of Charity Care
32Cost of Public Health Insurance Programs
33Net Cost of Health Professions Education
34Subsidized Health Services
35Research
36Template for Valuing Exempt Status
37Taxable Income if No Longer Exempt
38Online Accounting Resources
Quick Reference Guide Resources
www.chausa.org/communitybenefit/guide Accounting
Forms - www.chausa.org/communitybenefit/acctforms
990 Guide - www.chausa.org/communitybenefit/990inf
o
39Seven Recommendations
- Quantify community benefit
- Integrate the community benefit perspective into
strategic planning - Move responsibility for demonstrating community
benefit up the organization chart - Understand how your key strategic decisions
benefit the community - Incorporate community benefit key indicators into
dashboards - Develop corporate policy for how much is enough
- Regularly review policies and procedures
40The Role of Finance in Community Benefit
- Maintain cost accounting system and
provide/review needed data - Develop community benefit budget
- Develop/oversee implementation of financial
assistance policies and procedures - Help assess how much is enough
- Value of exemption
- Financial health
41The Role of Finance in Community Benefit
- Assure IRS Form 990 includes community benefit
information - Review public CB reports for accuracy and
completeness - Assure CB is represented in management/board
reporting - Assist in evaluating program cost effectiveness
- Participate in steering committee