Investments in Community Building Among Nonprofit Hospital Organizations in the United States

Nonprofit hospital organizations in the United States receive federal tax exemption with the expectation that they act to understand and address the health care needs of the communities they serve. The Internal Revenue Service requires that they report expenditures toward these activities on a form called the Schedule H. Spending is classified as community benefits or community building.¹ Community benefits largely describe unreimbursed and subsidized health care services.^2,3 Community building describes activities to “protect or improve the community's health or safety” not otherwise reported as community benefits.¹ Hospitals must report community benefits for tax exemption. For community-building activities to count toward tax exemption, organizations must supply additional documentation to reclassify them as community benefits.¹

The Internal Revenue Service allows hospital organizations to report community building in 9 domains—such as physical improvements and housing, economic development, and environmental improvements—related to social determinants of health.¹ According to estimates reported in some studies, nonprofit hospital organizations spend about 0.1% of operating expenses on community building,^2,3 but little is known about organizations’ contributions in each domain.

This study aimed to describe the distribution of spending in community building among the 9 domains by nonprofit hospital organizations.

We conducted a cross-sectional analysis of a national sample of nonprofit, acute care hospital organizations (entities operating 1 or more hospital facilities) for fiscal year 2016. Because this study did not involve research with human subjects, the Yale University Institutional Review Board indicated that it did not require institutional review board review or approval. We followed the Strengthening the Reporting of Observational Studies in Epidemiology (STROBE) reporting guidelines for cross-sectional studies.

We used data from the Community Benefit Insight Hospital Data Set.⁴ Community Benefit Insight integrates information from Schedule Hs, American Hospital Association annual surveys, and Centers for Medicare and Medicaid Services cost reports and contains a nearly complete (>85%) sample of nonprofit hospital organization filings for fiscal year 2016.^3,4 We used Stata SE, version 15 (StataCorp) to generate descriptive statistics of sample characteristics and expenditures in each community-building domain.

We identified 2102 unique Schedule H filings, representing 2903 hospitals from 2100 hospital organizations (Table 1). More than half of the hospital organizations (1140 [54.3%]) reported any spending on community building. Of those, community building accounted for a median of 0.04% (interquartile range, 0.009%-0.1%) of total operating expenses. Overall, hospital organizations contributed $434 million toward community building. Together, community support and workforce development accounted for 53.7% of all community-building investments, with the remaining 46.3% split among the other 7 domains (Table 2).

Most hospital organizations reported spending toward community building in fiscal year 2016. More than half of spending focused on community support and workforce development, consistent with findings from a study of hospitals in New York state.⁵ To our knowledge, this is the first study to detail community-building investments by domain in a national sample. Further investigation is needed to understand how and why hospitals decide to allocate money toward specific community-building domains and whether these investments are effective in improving community health.

This study has some limitations. Because the Internal Revenue Service does not require spending and reporting in community building, hospitals may participate in community building without reporting it on the Schedule H. In addition, because Schedule H data are generally reported by hospital organizations, attribution of investments to individual facilities within an organization is not possible.

Nonetheless, the Schedule H can be a tool for public accountability and a starting point for evaluating how hospitals engage with social determinants of health. Additional reform to the classification and incentivization of community building reporting may help enhance the social contract between nonprofit hospital organizations and their communities. Examples of such reforms include identifying clearly defined, evidence-based community-building activities that would count toward tax exemption and reducing documentation requirements for receiving credit for community building.⁶

Accepted for Publication: August 14, 2020.

Published: October 23, 2020. doi:10.1001/jamanetworkopen.2020.21898

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2020 Chen K et al. JAMA Network Open.

Corresponding Author: Kevin Chen, MD, MHS, National Clinician Scholars Program, Yale University School of Medicine, SHM IE-66, 333 Cedar St, PO Box 208088, New Haven, CT 06510 (research@kchenmd.com).

Author Contributions: Dr Kevin Chen had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.

Concept and design: All authors.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: All authors.

Critical revision of the manuscript for important intellectual content: All authors.

Statistical analysis: K. Chen.

Administrative, technical, or material support: All authors.

Supervision: K. Chen, Lopez.

Conflict of Interest Disclosures: None reported.

Funding/Support: Drs K. Chen and Lopez were supported by the National Clinician Scholars Program (NCSP) at Yale University via Clinical and Translational Science Award TL1 TR001864 from the National Center for Advancing Translational Science, a component of the National Institutes of Health (NIH). Dr K. Chen was also sponsored by the Department of Veterans Affairs Office of Academic Affiliations through the NCSP. Dr K. L. Chen is supported by the NCSP at the University of California, Los Angeles.

Role of the Funder/Sponsor: The funding organizations had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Disclaimer: The contents of this work are solely the responsibility of the authors and do not necessarily reflect the official views of Yale University, UCLA, the NIH, or the Department of Veterans Affairs.