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January 16, 2018

The ACA pushed hospitals to increase their community benefit spending—but that hasn't happened, study finds

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    Nonprofit hospitals' spending on community benefits has remained relatively stagnant since the Affordable Care Act (ACA) was enacted—despite a provision intended to spur hospital investment in such efforts, according to a recent study published in Health Affairs.

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    Under an ACA provision that took effect in 2012, nonprofit, tax-exempt hospitals are required to perform a community health needs assessment every three years. Hospitals are instructed to use that data to develop and implement strategies to improve their communities, which according to Kaiser Health News could include efforts to lower diabetes rates or prevent violence.

    According to Politico's "Pulse," health policy experts had hoped the ACA requirement would prompt nonprofit hospitals to invest more in community health efforts, but the Health Affairs study suggests that hasn't happened so far.


    For the study, researchers examined tax forms submitted by tax-exempt hospitals from 2010 through 2014 to determine nonprofit hospitals' spending on community benefits, which the Internal Revenue Service (IRS) breaks down into seven categories, including community health benefits. 

    The researchers found that nonprofit hospitals on average spent 8.1% of total operating costs on all community benefits in 2014, up from 7.6% of total operating costs in 2010. While that does represent an increase, the researchers say it is in line with historic trends.

    The researchers found nonprofit hospitals' spending on community health benefits in particular was virtually unchanged, remaining under 1% from 2010 to 2014.


    Gary Young, the lead author of the study and director of the Center for Health Policy and Healthcare Research at Northeastern University, said that many nonprofit hospitals lack the infrastructure, "the personnel or the knowledge to develop [broad community-based] strategies."

    However, Lawrence Massa, president & CEO of the Minnesota Hospital Association, said it's too early to determine whether the ACA requirement is affecting hospital spending. He added, "If everything stayed the way it was, I think we would know by 2020 whether this had the kind of impact that was anticipated."

    But Massa noted that the policy landscape has shifted recently: The new tax reform law repealed the ACA's individual mandate, a change that is expected to increase the number of uninsured people by about 13 million by 2027, according to the Congressional Budget Office. That could place new pressure on hospital finances.

    Massa said, "We certainly expect to see our uninsured rate go up … so that's going to have an opposite type of effect of where we thought the trend [on community benefits] was going to be because we changed the rules in the middle of the game."

    According to Gregory Tung, an assistant professor at the University of Colorado's School of Public Health, "Anything that destabilizes the system and takes money out of the hospitals' revenue stream is going to negatively impact them. It's tough for hospitals to be navigating that uncertainty" (Connor, Kaiser Health News, 1/8; Diamond, "Pulse," Politico, 1/9; Young et al., HealthAffairs, January 2018).

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