Bill would require more spent on ‘community benefit’
Legislation would remove ability to claim free, discounted care to meet IRS requirement
Nonprofit hospitals are required to show they spend money on “community benefit,” but a bill in the Colorado legislature would require them to invest more and focus on different priorities.
The Internal Revenue Service doesn’t require hospitals to spend a specific amount on community benefit, though it does verify whether they met related requirements, like conducting a community needs assessment every three years.
Community benefit is loosely defined, and can include free and discounted care; the difference between the cost of care and what Medicare or Medicaid pays; medical research; classes to help patients manage their chronic conditions; staff training; and spending to help meet patients’ social needs, like food and housing.
Colorado House Bill 23-1243 would set that each nonprofit hospital spend at least 3% of its revenue from treating patients on community benefit, unless its federal and state tax exemptions are worth less than that. The target would rise gradually to 5% of patient revenue.
The bill would redefine community benefit spending, adding behavioral health and community-based health care as categories. It would also remove the ability to claim free and discounted care, and programs targeting health behaviors.
Rep. Judy Amabile, a Boulder Democrat who sponsored the bill, said the exact thresholds and definitions are open to discussion, but that she thinks hospitals need to better align what they’re offering with their communities’ priorities.
“What we’re trying to do is put some guardrails around what is a community benefit, and who decides,” she said. “Of course we want the hospitals to do some charity care, but … we don’t want that to all be in place of what the community wants.”
Of 43 nonprofit hospitals with state data on patient revenues and community benefits in 2021, 23 would exceed the 3% threshold, and 17 would clear the 5% bar under the current definitions.
The bill would change what counts as community benefit, however, and the Colorado Hospital Association believes only two hospitals would make the cut with the new definitions. It likely would require an additional $491 million in spending, said Josh Ewing,
vice president of government affairs at the Colorado Hospital Association.
“It would be the most aggressive (community benefit) threshold in the nation, by far,” he said. “I don’t know why we would differ that much from the federal definition.”
In his State of the State address in January, Gov. Jared Polis pledged to hold hospitals “accountable,” particularly for what they claim as community benefits.
“Nonprofit hospitals, who have the benefit of not having to pay taxes, must work with their communities to live up to the promise that providing benefits, like mental health, maternity care, health care workforce growth, support for social determinants of health like housing and food, occur,” he said.
A report by the Colorado Department of Health Care Policy and Financing, released in midjanuary, found hospitals invested $965 million, or about 7% of their