On April 5, 2013, the Department of the Treasury issued proposed regulations that provide guidance to hospital organizations that are now required to perform community health needs assessments (CHNAs) to qualify as charitable organizations.
These assessments were mandated by federal health care reform, and charitable hospital organizations must now conduct a CHNA at least once every three years, and an "authorized body" of the hospital must adopt an implementation strategy to meet the community health needs identified.
A. The CHNA
In carrying out a CHNA, a hospital facility must define the community it serves and assess the health needs of that community. In assessing the community's health needs, the hospital facility must take into account input from persons who represent the broad interests of its community, including those with special knowledge of or expertise in public health.
The hospital facility must also document the CHNA in a written report that is adopted by the authorized body of the hospital facility, and then make it widely available to the public. The 2013 proposed regulations provide guidance on each of these requirements.
While there is a $50,000 excise tax penalty for failing to conduct a proper CHNA, there is also a far more significant potential consequence, namely, the revocation of the hospital's tax-exempt status.
The proposed regulations, however, reject the approach that all violations merit such revocation. Rather, in determining whether revocation is warranted, the proposed regulations provide that the Treasury and the IRS must consider the relative size, scope, nature, and significance of failing to meet the requirements, as well as the reasons for such failures, and whether the same type of failures have previously occurred.
Even when the omissions or errors rise above the level of minor and inadvertent, the 2013 proposed regulations adopt the approach that a hospital facility's prompt discovery and correction of such omissions or errors is in the best interest of patients, and that requiring hospital facilities to report such omissions or errors and disclose how such omissions or errors were corrected (for example, on the Form 990) would achieve transparency, which is another important objective of the new requirements.