Review Your Hospital’s Community Health Needs Assessment and Implementation Plan!

The Patient Protection and Affordable Care Act (“ACA”) added new requirements that tax-exempt hospital organizations must satisfy in order to be described in Internal Revenue Code (“IRC”) §501(c)(3). Under IRC §501(r)(3) an organization that operates one or more hospital facilities must conduct a Community Health Needs Assessment (“CHNA”) and adopt an implementation strategy at least once every three years. The initial failure to comply results in an excise tax of $50,000 per facility per year.

On August 24, 2021, the Journal of the American Medical Association (“JAMA”) published an article related to the findings of their study performed on IRC §501(c)(3) tax-exempt hospitals compliance with the requirements of IRC §501(r)(3). The study examined the following: (1) did the organization conduct a triennial CHNA and adopt an implementation strategy; (2) did the organization abide by the specific documentation requirements; and (3) did the organization make these documents widely available to the public.


IRC §501(r)(3) requires a tax-exempt hospital organization to conduct a CHNA once every three years for tax years beginning on or after March 23, 2012. In addition, the hospital organization must have an authorized body adopt a written implementation strategy to meet the needs identified in the CHNA.

Conducting a CHNA requires a hospital organization to do the following: (1) define the community served; (2) assess the health needs of the community; (3) solicit and consider input received from persons who represent the broad interests of the community, including those with special knowledge of or expertise in public health; (4) document the CHNA in a written report that is adopted by an authorized body of the hospital facility and (5) make the CHNA report widely available to the public.

In addition, a hospital organization’s implementation strategy must be a written plan that, for each significant health need identified, either: (1) describes how the hospital facility plans to address the health need, or (2) identifies the health need as one the hospital facility does not intend to address and indicates why it does not intend to address the particular health need. An authorized body of the hospital facility must adopt the implementation strategy. Generally, this must be done on or before the 15th day of the fifth month after the end of the taxable year in which the hospital facility finishes conducting the CHNA.

Study Statistics

The Yale University Human Research Protection Program performed a search via ProPublica Nonprofit Explorer to identify 1,662 tax-exempt hospitals in the United States. The study randomly selected 500 of the tax-exempt hospitals which their respective Form 990; Schedule H was downloaded for review to assess compliance with CHNA requirements. The findings were as follows: 495 (99%) hospitals reported on their Form 990 that a CHNA was conducted, of these, 412 (84%) CHNAs were identified on the tax-exempt hospitals website. There were 491 (99%) hospitals which reported that an implementation strategy was adopted, of these, 331 (75%) were identified on the tax-exempt hospital’s website. In conclusion, it was determined that only 229 (60%) of the tax-exempt hospitals selected for this study had both a CHNA and implementation strategy on their website.

Study Uncovered Deficiencies

The study uncovered significant deficiencies with tax-exempt hospital organizations’ CHNAs and implementation strategies. Some of the more frequent findings include: missing required documentation; not including an evaluation of impact of any actions that were taken to address the significant needs identified; and not describing available resources to address the health needs identified. Although most tax-exempt hospitals reported on their Form 990, Schedule H that they conducted a CHNA and adopted an implementation strategy accordingly, only 60% of the hospitals reviewed actually fully satisfied the requirements of IRC §501(r)(3).

Quality Scores for CHNA Reports by Documentation Requirement

The CHNAs had a mean quality score of 3.2 out of 5. Many were missing one or more of the IRS requirements outlined in IRC §501(r)(3). The study outlined the CHNA requirements and scores as follows:

CHNA Element Score, mean (out of 5)
Definition of community 4.17
Methods 4.14
Input from community 3.71
Description of underserved community 2.39
Prioritization of health needs 2.8
Resources available 3.24
Evaluation of impact since last CHNA 2.13

Withum Recommendations

Withum recommends the following for tax-exempt hospitals with respect to staying compliant with the Regulations under IRC §501(r)(3):

  • Review your most recent CHNAs in conjunction with the IRS requirements
  • Coordinate a review of the Form 990 Schedule H CHNA questions and answers and applicable disclosures consistent with your CHNA and implementation plan
  • Designate a responsible person from your organization to lead IRC §501(r)(3) compliance
  • Form a community benefit committee
  • Involve senior management and the Board
  • Review your organization’s website and make sure the last two required CHNAs are posted on the organization’s website
  • Check your organization’s CHNA and other documents website links regularly


Form 990 Schedule H incorporates questions regarding a tax-exempt hospital facility’s CHNA and implementation plan, including the URL’s where these reports should be posted and made widely available. The Form 990 is open for public disclosure and in today’s hostile environment with respect to hospitals and tax-exemption an organization needs to be careful to comply with all IRS, state, and local tax-related requirements. The Internal Revenue Service (“IRS”) continues to conduct reviews of tax-exempt hospital’s compliance with IRC §501(r)(3) and if an auditor cannot easily find a tax-exempt hospital’s CHNA or implementation strategy it is an easy way to be selected for a compliance check, imposition of excise taxes and/or a subsequent IRS audit examination.

Contact Us

For more information about IRC §501(r)(3), contact a team member of our Healthcare Services team.