Community Health Needs Assessment Section of IRS Form 990 Gets Significant Update

Non-profit hospitals should take notice of changes the IRS has made in its Draft 2014 Form 990 Schedule H. The IRS is trying to make its Schedule H more closely mirror requirements in the Affordable Care Act, section 501(r). In particular, the updated draft form requires more commentary so that the IRS can get quicker visibility into whether hospitals are living up to the true purpose of the Community Health Needs Assessment (CHNA) regulations. Here are some key points to note in the updated form:
 
More specificity in check-the-box questions
 
501(r) details that a hospital must adopt an implementation strategy to meet the needs identified in the CHNA by the end of the same taxable year in which the CHNA was conducted. The Draft Schedule H now asks for the tax year in which the CHNA was adopted and either a link to or a copy of the implementation strategy. This updated draft also provides clarity to the IRS about allowable exceptions that might be missed in a simple review of previous forms. Here’s an example. We have a client that is a newly formed non-profit hospital facility. Under 501(r), new hospital facilities have until the end of their third taxable year to co

nduct a CHNA. Since they were brand new they did not need to conduct a CHNA, and indicated that no CHNA had been conducted on their Schedule H. But they got an IRS notice anyway, likely because the IRS review of their form showed that the CHNA portion of the Schedule H was not filled out. The updated form now has a question a hospital can check that asks whether the facility has been licensed within the past 2 years.
 
More clarity on addressing “significant” needs
 
Other CHNA questions on the Schedule H have been updated to clarify that not all needs identified in the CHNA need to be addressed in an implementation strategy - only those that are significant. This was an assumption many practitioners were already using in responding to the questions on the previous Schedule H. But now hospital facilities will have to provide a narrative on how those needs identified as “significant” are being addressed, instead of just checking the standard answer boxes that were on the old schedule.
 
Transparency
 
As with most changes to the Form 990 and its schedules, the IRS is requiring more information in an effort to increase transparency. However, the Schedule H changes also reflect the IRS's attempt to have its forms more accurately reflect the 501(r) regulations and the reporting of compliance with these regulations. For example, specialty hospitals that do not operate to serve more general community health needs will have a place on the new form to note the reason why they are not addressing some of the general significant health needs uncovered in their CHNA.
 
The bottom-line for most non-profits is that if they have been lax in meeting either the implementation deadline or in truly addressing significant needs discovered in the CHNA, then the IRS will now have a way to discover non-compliance in its updated Schedule H.

For weekly insights from the HORNE Health Care blog, please sign up here: