
While clinical employees work around the clock treating and supporting patients, hospitals continue to experience significant business disruption. COVID-19 has affected the financial stability of the healthcare industry significantly, causing healthcare systems and hospitals to incur unprecedented costs and incur significant loss of revenue. As intended, the enactment of the CARES Act has provided some relief and allowed hospital organizations to provide continued care and community benefits to their patients and communities throughout these challenging times.
Annually, tax-exempt hospital organizations file a Federal Form 990, Return of Organization Exempt from Income Tax wherein it reports its community benefit activities within Schedule H. Community benefits include the estimated net costs related to financial assistance provided at cost, Medicaid shortfall, community health improvement services and community benefit operations, health professions education, subsidized health services, research and cash/in-kind contributions. The community benefits provided by hospitals help to support their federal, state and local tax-exempt status. Therefore, it is essential for hospitals to identify and track these costs and quantify their community benefit activities.
The Catholic Health Association (“CHA”) released preliminary guidance and recommendations for reporting community benefits related to COVID-19 as summarized below:
Hospitals should examine all unexpected, unbudgeted expenses incurred from the start of the pandemic for community benefit purposes. Certain hospital costs related to COVID-19 may be included within one of the community benefit areas, so long as they are not deemed to be a “cost of doing business” expense. These costs may include, but are not limited to:
Please note that the above are only CHA preliminary general recommended guidelines and will likely be updated throughout and following the conclusion of the pandemic. Our healthcare services team believes that there are additional potential COVID related costs to include on a hospital’s Form 990 Schedule H; including activities and programs potentially specific to only your hospital organization under its facts and circumstances; thus, timely coordination and identification is essential.
Hospitals can benefit substantially by establishing procedures to collect information contemporaneously as the pandemic continues to unfold. Developing a tracking system of any COVID-19 related revenue and expenses will ease the burden of determining the organization’s community benefit when preparing its Form 990. Moreover, certain COVID community benefit information for Form 990 Schedule H purposes can be collected through the hospital’s FEMA reporting. We recommend that finance, community benefit personnel and others collaborate on this endeavor though a community benefit committee or group.
The pandemic continues to significantly disrupt the healthcare industry. As medical professionals take to the frontlines, the supporting departments of these organizations can take action as well by working together to identify healthcare programs, activities and services that enhance and improve public health, advance medical knowledge, and provide additional benefits to their communities.
Authors: Hayley Shulman | hshulman@withum.com and Johanna Orellana | jorellana@withum.com
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