Section 501(r) requires that thorough CHNAs be conducted every three years in order to maintain their 501(c)(3) nonprofit status. These needs assessments must define the community served by the hospital, the needs of the community, and a strategy addressing the identified community needs. Since each facility that fails to meet CHNA requirements loses its nonprofit status and has to pay a $50,000 excise tax, nonprofit hospitals and networks need to pay special attention to the changes and incorporate these new requirements into their needs assessments.
The new IRS regulations require that a CHNA be conducted with the following steps:
- Define the community it serves.
- Assess the health needs of that community.
- In assessing the health needs of the community, solicit and take into account input received from persons who represent the broad interests of that community, including those
- Document the CHNA in a written report (CHNA report) that is adopted for the hospital facility by an authorized body of the hospital facility.
- Make the CHNA report widely available to the public.
26 CFR §1.501(r)-3(b)(1)
The new IRS regulation allows nonprofit hospitals and nonprofit organizations to define what constitutes their actual “community” for the CHNA as long as the community definition does not exclude low-income, minority, or other medically underserved populations. Fortunately, the regulation has a cost saving or resource pooling provision that allows hospitals with identical community definitions to conduct a joint needs assessment and develop a joint strategy for addressing the identified community needs. Hospitals that have overlapping, but not identical, communities can jointly prepare parts of their CHNA.
The IRS regulations also expand the scope of the assessable health needs to include “the need to address financial and other barriers to accessing care, to prevent illness, to ensure adequate nutrition, or to address social, behavioral, and environmental factors that influence health in the community.” These are only examples, however, and those conducting a CHNA should determine if these needs are significant health needs in their defined community. When conducting a needs assessment, the nonprofit hospital or organization must receive input on these needs from a governmental health agency, members or representatives from low-income, minority or medically underserved populations. Nonprofit hospitals will also need to consider the written comments about their most recent CHNA and its impact on the community. The nonprofit hospital needs to fully document all of its efforts to obtain input and feedback from the identified populations and document in the CHNA report whether those populations responded or failed to respond to those requests for input.
The final CHNA report adopted by the facility must, under the new regulations, include an evaluation of the impact or results of any actions or efforts made as part of the strategy to address the needs identified in the prior needs assessment. Thus, the current or future CHNA report must include assessment of the effectiveness of the prior needs assessment strategy.
The implementation strategy no longer has to be adopted within the same taxable year CHNA’s completion. Instead, the implementation strategy or plan must now be adopted or implemented before the 15th day of the fifth (5th) month after the end of the taxable year in which the CHNA was carried out, which gives nonprofit hospitals an extra five and a half months to implement the plan or strategy. So, if a CHNA was completed in December 2014, the implementation strategy would need to be implemented in the next 5.5 months, which would be in May 15, 2015.
Emily M. Hord
McBrayer, McGinnis, Leslie & Kirkland