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As mission-driven charitable organizations governed by community leaders, VNAs justifiably take enormous pride in the wide range of benefits they generate for their local communities. From providing free and subsidized care, to serving as the most important community-based source for flu vaccine shots, VNAs have distinguished themselves as leaders in generating major advances in access to care and public health. VNAs have also earned wide recognition as "safety net" providers of healthcare services, treating all patients regardless of ability to pay.
In exchange for their contributions, VNAs enjoy exemption from most local, state, and federal taxes. However, with growing pressure to finance healthcare reform and to balance state and local government budgets, that tax-exempt status may be at risk.
Just ask local hospital executives-under pressure from the Internal Revenue Service (IRS) and other government agencies, hospitals are being forced to demonstrate in clear and measurable ways the dollar value of the benefits they generate. In the absence of federal standards on just how much community benefit nonprofit hospitals should provide, some states have enacted laws legislating the amount of community benefit necessary to maintain state tax-exempt status. For example, Texas, Rhode Island, and Illinois stipulate that hospitals must provide benefits equal to 3% to 5% of the greater of net operating revenues or total expenses. Some states now require hospitals to have written charity care policies and plans for serving the community and the uninsured.
Other charitable healthcare providers, including VNAs, can expect to face the same or similar standards in the coming years. Since the work to quantify community benefits is complex and time-consuming, VNAs should start the process now if they haven't already.
As a first step, VNA leaders should examine Schedule H of the IRS Form 990 tax-exempt filing for general insights on the way the IRS approaches community benefit reporting. Schedule H, created by the IRS in concert with the hospital industry, lays out the definitions and procedures for measuring and reporting community benefits. Under current definitions for hospitals, community benefits include charity care, Medicaid losses, and health prevention programs. VNAs can determine for themselves the amount of total IRS-defined "community benefit" they generate by using Schedule H and following its instructions, not for purposes of filing the form (which is required only for hospitals at this time), but in order to prepare for a future filing requirement and to have the resulting totals available for other purposes.
Some hospital representatives have argued that community benefit should be expanded to include bad debt expenses and any unreimbursed costs of caring for Medicare patients (i.e., Medicare shortfalls). While the IRS doesn't recognize these expenses as community benefit, hospitals are allowed to report them in their Schedule H filing. Of the 23 states with either mandatory or voluntary Community Benefit Reporting laws in place, 10 states recognize bad debt expenses as community benefit while 14 states recognize Medicare shortfalls.
VNA leaders should also review the Catholic Health Association's published manual entitled "A Guide for Planning and Reporting Community Benefit," which was developed to help nonprofit mission driven healthcare organizations develop, enhance, and report on their community benefit programs. This guide will help VNAs begin to think strategically about community benefit reporting as well as help VNAs identify the needs within the communities they serve. According to Natalie Dean, who is a Director of community benefit for Trinity Health, "Community benefit should be approached as a business construct of the organization in the same realm, with the same rigor and accountability, as financial performance and patient care services."
Once a VNA has formally tabulated its community benefits, it can and should report the results widely in the community. Publicizing the dollar value of an agency's contributions can help justify favorable tax treatment while also showing the community that the support it gives through charitable contributions are warranted. Community benefit data can also support advocacy for improved Medicare and Medicaid reimbursement so VNAs can extend their services even more broadly. For example, aggregated community benefit data for all VNAs can help document the need for supplemental Medicare payments for mission-driven home health agencies that serve disproportionate numbers of Medicaid patients and patients with complex and chronic conditions.
Equally important, tabulating community benefits and sharing the data publicly honors a longstanding VNA tradition and value-accountability to the communities we serve. The greater the degree of accountability we accept, the more likely the public will be to strengthen its commitment to the long-term financial sustainability of these vital community assets.
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