On Health Equity and the ACA’s Community Health Needs Assessment Requirement for Nonprofit Hospitals

The twentieth century saw a series of major developments in health. One was the growth of the hospital industry, driven by rapid medical advancements and new methods of financing hospital services. Another was the professionalization of public health, a discipline that took a population approach to improving health, focusing on the health status of populations rather than individuals. We might guess that these two developments, having natural sympathies, were deeply interrelated from the start. But in large part this was not so. Early on, physicians pushed for strict boundaries between medicine and public health, seeing the conscription of the medical profession to serve public health goals as a form of state overreach.

In our more enlightened age, using the healthcare system to pursue public health goals has gained traction among both thinkers and practitioners. One such effort is the Affordable Care Act’s (ACA’s) requirement that tax-exempt hospitals assess the health needs in their communities and, based on their findings, try to root out the drivers of poor health.

Here, I ask whether these newly required community health needs assessments (CHNAs) could help achieve health equity, which is the goal of giving every person a fair chance to reach their best possible health. I conclude that while this approach has potential, stronger and more specific requirements may be needed to ensure that CHNAs are squarely addressing health equity.

What Makes a Hospital ‘Nonprofit’?

The IRS’s definition of “nonprofit” hospital has evolved over time, tracking underlying changes in who nonprofit hospitals treat and how they are funded.

Federal law has long said that hospitals qualify for a tax-exemption if they are organized and operate exclusively for a charitable purpose. For some time, this only meant providing free or cheap care to poor patients. But the IRS shifted to the “community benefit” standard in the ‘60s. The new standard said that hospitals could be exempt from paying taxes in exchange for doing a range of things that were deemed to benefit the local community. Whether a hospital passed this test depended on several factors, such as whether it operated an emergency room open to all regardless of their ability to pay, provided services to patients with public forms of health insurance, or used excess revenues to improve services, research, or training.

The shift from the charity care test to the broader, more flexible community benefit standard was rooted in changes to the American hospital system. In the twentieth century, nonprofit hospitals evolved from donor-funded “last resort” institutions serving the poor, to institutions that served patients from all classes of society and relied on payment for their financing, including third-party sources of payment like private insurance, Medicare, and Medicaid.

Regardless of the IRS’s rationale for the change, critics felt it didn’t go far enough to justify the lost tax revenue from nonprofit hospitals. To start with, the line between nonprofit and for-profit hospitals remained fuzzy. Like profit-making institutions, many nonprofit hospitals appeared to prioritize increasing market share rather than addressing the health problems of the underserved. And many of the activities that the IRS said benefited the community—such as accepting Medicare and Medicaid and maintaining an emergency room that is open to all comers—occur in both for-profit and nonprofit hospitals at comparable rates. What’s more, the IRS’s community benefit standard did little to encourage nonprofit hospitals to take on a larger role in improving the health of their communities as a whole—a noteworthy omission given the emerging view that hospitals should share in the responsibility for public health on top of their traditional role.

The ACA’s CHNA Requirement

Many of the ACA’s reforms were designed to integrate the goals of community health—basically, public health principles applied to people living in a specific geographic area—into the healthcare system. These changes included the requirement that tax-exempt hospitals must do periodic assessments of the health needs in their communities and develop plans to address those needs. (The ACA placed other obligations on tax-exempt hospitals—like restoring some requirements for free or low-cost care—but we won’t review those here.)

The concept of the CHNA was already a staple in the public health toolkit by the time Congress passed the ACA. Such assessments are done by state and local health departments to identify health needs in their jurisdictions. The results are typically used to plan and implement actions that improve health outcomes. This ongoing cycle of assessment and planning is known as the community health improvement process. Taking a page out of the public health manual, Congress specified in the ACA that each tax-exempt hospital must do a CHNA every three years and use the findings to develop an implementation strategy (IS). The law further clarified that a CHNA must check several boxes: for example, it must take into account input from individuals and groups that represent the broad interests of that community and be made available to the public as a written report. It’s worth pointing out that some states have independent requirements that resemble the federal CHNA provision.

Nonprofit hospitals have gone through multiple rounds of the CHNA process since 2012. A quick glance at these public documents shows that the health needs identified in CHNAs can range from specific health conditions (e.g., diabetes, substance use, cancer), to barriers in accessing care (e.g., uninsured rates, provider shortages), to the social determinants of health (e.g., housing, employment, food insecurity). Most CHNAs employ one or more public health frameworks or tools, including the County Health Rankings Model or the Mobilizing for Action Through Planning and Partnerships (MAPP) process. Some hospitals choose to align their CHNAs with the health planning efforts of state or local health departments, nearby hospitals, or community-based organizations.

Weighing the Impact of CHNAs on Health Equity

In the abstract, the ACA’s CHNA requirement seems like an ideal way to improve health equity at the community level. Its implementing regulations emphasize the importance of health disparities, and empower hospitals to use the CHNA process to improve equity in various ways. For instance, the regulations say a hospital can’t exclude “medically underserved, low income, or minority populations'' from its definition of its local community. It must also define its community in a manner that allows it to focus on the health of subpopulations who face elevated health risks. While developing its CHNA, a hospital is instructed to get input from “the broad interests of [its] community,” which the IRS says includes the interests of people that face health disparities or barriers to getting health care. As hospitals identify health needs to include in their CHNAs, they are asked to consider what’s needed to protect or improve the health of “particular neighborhoods or populations experiencing health disparities.” They are also allowed to prioritize some health needs over others based on the health disparities associated with these needs.

But whether hospital CHNAs actually cause improvements in health equity is unclear. For one thing, we can’t rely on hospitals to report on their own impact on community health. Although tax-exempt hospitals must evaluate the impact of the activities included in their ISs, they don’t have to quantify the effects of these activities on the health outcomes in any standardized way. And for hospitals that do try to describe their impact on health, it may be hard for them to disentangle the impact of their own contributions from those of community partners, especially where there has been significant cross-sector collaboration. This might be one reason why CHNAs seem more likely to document the number of individuals served by programs, or the amount of money spent, than to estimate the effect of their activities on health.

If we turn to the research literature, we find that the overall quality of hospital CHNAs leaves something to be desired. Many hospitals reportedly leave one or more key CHNA elements unaddressed, especially when it comes to evaluating the impact of their actions since their last CHNA, describing the underserved populations that provided input, and identifying the resources at the community’s disposal. Better CHNAs seem to be produced by hospitals that collaborated with their local health department or hired a consultant.

We see similar problems when we look at how CHNAs deal with health equity. One study that looked at CHNAs by urban hospitals showed that, while a majority mentioned health disparities or health equity, less than half discussed the upstream causes of inequities, and only one in ten of their corresponding ISs included activities explicitly designed to improve health equity. The variance was not random: hospitals in the South were less likely to discuss health equity in their CHNAs versus other regions. And CHNAs that were done by a single hospital, as opposed to those conducted in concert with multiple hospitals, also tended to include less health equity-related content. Another study on nonprofit hospitals in the Minneapolis-St Paul area found that, while most actions included in hospitals’ ISs were aimed at the social determinants of health, very few addressed the structural causes of health inequities. Although they’re not definitive, these findings cast some doubt on the CHNA requirement, as it’s currently implemented, as a path towards health equity.

Health Equity Content in CHNAs

Despite these big-picture deficits, we’re not without examples of CHNAs that make at least a solid effort at addressing health equity. For example, Kaiser Permanente’s Oakland Medical Center’s 2022 CHNA sets health equity—and especially racial equity in health—as its north star. Accordingly, it analyzes community data from a racial equity viewpoint, uses this information to prioritize some health needs over others, and emphasizes, among other things, the link between social determinants and inequities. Likewise, many of the activities included in the hospital’s IS explicitly target disparities—for example, supporting students and entrepreneurs of color, diversifying the healthcare workforce, and addressing trauma among Black, Indigenous, and other people of color. (It’s worth observing that the hospital’s previous CHNA wasn’t as explicitly centered on equity, a change we might attribute to the local community’s response to intervening events, for example, COVID-19’s unequal impacts on communities of color and the police killing of George Floyd in 2020.)

See also the 2022 CHNA from New York Presbyterian Hospital. Per the state-wide health improvement plan of New York, which instructs partner hospitals to prioritize “promoting health equity across populations who experience disparities” in their individual CHNAs, New York Presbyterian integrates equity throughout its CHNA. For example, the CHNA uses first-hand accounts from community members to highlight the needs of people of color, LGBTQ+ people, older adults, and immigrants. In its description of the community being served, the CHNA identifies high-disparity neighborhoods which are prioritized for health programming. In the section on health needs, “discrimination, racism, and chronic stress” is listed as a stand-alone health need, and the CHNA also explains the unequal effect of each health need on different population subgroups. The hospital’s IS shows how all of its priorities and interventions are meant to reduce disparities and promote health equity.

Conclusion

Federal law expects nonprofits to perform certain beneficial activities in exchange for being free from tax. In the case of nonprofit hospitals, the ACA’s CHNA requirement sharpened this expectation: under the ACA, each tax-exempt hospital must develop a CHNA and IS designed to improve the health of the community it serves. In theory, the CHNA requirement could be a promising way to advance health equity, which is a key factor in population health. But the low quality of CHNAs in general, and their shallow treatment of health equity in particular, might be frustrating this goal. So what’s to be done about this? There are a few directions for state and federal policymakers to explore:

• Expand tools and incentives for nonprofit hospitals to determine the impact of their activities on the health of their local communities. For example, tax authorities could clarify that, wherever possible, hospitals should try to quantify their CHNAs’/ISs’ influence on health outcomes and disparities. It might also help to share models and best practices that can be used to draw a causal link between hospitals’ actions and health outcomes.
  
• Build on existing CHNA/IS requirements to ensure health equity is adequately addressed. Health equity could be given a bigger role in various parts of the process, including how hospitals get community input, which community partners they collaborate with, how they choose which health needs are prioritized in their CHNAs, and how they choose IS activities to pursue. Hospitals could also be instructed to align their CHNAs with the public health priorities of state and federal agencies (e.g., New York’s Prevention Agenda; the federal Healthy People initiative); these efforts are increasingly recognizing health equity as a top priority.
  
• Encourage nonprofit hospitals to put more resources behind the community health improvement activities from their ISs. Currently, the IRS allows hospitals to use their spending on clinical activities, like the provision of charity care, to show their compliance with the community benefit standard. By contrast, money spent on IS activities doesn’t typically count towards meeting the standard. To the degree that this exerts an influence over how hospitals allocate investments, clarifying that community health improvement activities can factor into the IRS’s community benefit calculation may be beneficial.
  
• Empower tax authorities to better monitor compliance with and enforce CHNA requirements. A more careful review of CHNAs’ completeness and quality—and the use of warnings or penalties where necessary—might help minimize the omission of required CHNA elements and signal to hospitals that they can’t treat the CHNA requirement as a mere formality.