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COVID-19 and Hospital Form 990 Schedule H Community Benefit Reporting

Throughout the last several months, the COVID-19 pandemic has had, and continues to have, a significant impact on the healthcare industry.

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.

Background

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.

CHA Preliminary Community Benefit Guidance

The Catholic Health Association (“CHA”) released preliminary guidance and recommendations for reporting community benefits related to COVID-19 as summarized below:

  • Financial Assistance – Hospitals should consider reviewing their financial assistance policies and consider whether to make changes based on the current environment.
  • Government Sponsored Means Tested Health Care – Hospitals should monitor any federal, state or local policy changes related to eligibility for these programs during the crisis. They should also track any additional public payments that offset losses.
  • Community Health Improvement Services:
    • Community Health Education – consider inclusion of costs related to participation in awareness and education activities for the community and first responders (telephone hotlines, public service announcements, media responses);
    • Community-based Clinical Services – consider inclusion of free or nominal cost services or screenings for COVID-19, flu immunizations, mobile units and offsite testing costs;
    • Health Care Support Services – consider inclusion of executive and other employee time spent planning for and recovering from the public health emergency, as well as, expenses incurred for community mental health services; and
    • Social and Environmental Improvements – consider inclusion of activities related to responding to social needs of the community (food and housing insecurity), as well as, expenses incurred for the establishment of command centers specific to disaster readiness.
For more information on this topic, please contact a member of Withum’s Healthcare Services Group.
  • Health Professions Education – consider inclusion of costs associated with educating health professionals related to treating or responding to the coronavirus.
  • Subsidized Health Services – consider inclusion of costs for programs, clinical departments or service lines that are subsidized and continue to operate despite the loss in order to meet a need within the community (for example: emergency departments, ICU’s, OB, behavioral health).
  • Research – consider inclusion of costs for research conducted on COVID-19, including screening, treatment and the impact on the health and welfare of communities.
  • Cash and In-Kind Donations – consider inclusion of costs related to assisting other hospitals and health care facilities that did not have the resources, capacity or expertise to meet COVID-19 response needs; assisting other community organizations responding to the pandemic including support for mental health and substance abuse programs; and in-kind contributions of donating medical, surgical and pharmaceutical supplies and providing staff to other organizations to conduct training or provide services.

Additional Community Benefit Considerations

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:

  • The cost of medications, supplies and equipment, including purchase and rental of ventilators (not billed to individual patients);
  • Costs associated with establishment of alternative work locations;
  • IT infrastructure enhancements including additional capacity for employees working remotely;
  • Facility enhancements or modifications including construction costs for temporary or mobile medical units;
  • Costs for redeployed, contracted or quarantined employees;
  • Increase in environmental services cleaning agents; and
  • Other unreimbursed costs related to surge capacity.

Conclusion

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

Healthcare Services

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