Update on New CHNA Regulations (and lessons learned)

1. Update on New CHNA Regulations(and lessons learned) Scott Dahl, MBA Director of Business Development, East RegionHealthy Communities Institute

2. New Proposed Regulations on CHNAs KEY DATES: • April 2013: IRS issued new and updated proposed regulations providing 501(c)(3) hospitals additional guidance on the section 501(r) requirements for CHNA • October 5, 2013: CHNA reports and implementation strategies completed before this date were considered compliant as long as they met either set of requirements - prior guidance (IRS Notice 2011-52) or the proposed regulations; CHNA reports and implementation strategies completed after this date can no longer rely on the prior guidance • August-December 2013: Publication of the final regulations expected to be issued, carrying the weight of law

3. CHNA Change: “Significant” Health Needs CHNA change: • Need to identify, prioritize, and respond to “significant” community health needs • Free to determine significance based on relevant facts and circumstances, but you must explain your process in CHNA Report • Empower hospitals to focus on issues considered of utmost important without requiring disclosure of insignificant issues

4. CHNA Change: “Significant” Health Needs Status compared to others Status compared to HP2020 or state/ community targets Patterns

6. Determinants of Health University of Wisconsin Population Health Institute. County Health Rankings 2012

7. “Significant”: Look Beyond The Tip of the Iceberg

9. “Significant:” Get as Granular as Possible

11. CHNA Change: CHNA Report Approval CHNA change: • Proposed regulations require that the CHNA report and implementation strategy be approved by an authorized body • An authorized body is hospital’s governing body, a committee, or an individual that has been authorized by governing body

12. CHNA Change: Joint CHNA Reports and Implementation CHNA change: Proposed regulations now allow a joint CHNA report and implementation strategy if: • The hospitals collaborate in conducting their CHNAs • The hospitals define their communities as the same • The joint CHNA report is clearly identified as applying to each hospital • The joint CHNA report is approved by an authorized body of each hospital

13. CHNA Change: Joint CHNA Reports and Implementation

14. CHNA Change: Joint CHNA Reports and Implementation

15. CHNA Change: Joint CHNA Reports and Implementation

16. CHNA Change: Implementation Strategy Detail CHNA change: • Proposed regulations require significantly more detail in the implementation strategy, including: • The programs and resources the hospital plans to commit to addressing the health need • The anticipated impact of the responses • A plan to evaluate such impact • Any planned collaboration with other hospitals or organizations

21. CHNA Change: Implementation Strategy Detail CHNA change: • Time extended for a hospital to complete its first implementation strategy • CHNA report and implementation strategy must generally be completed within the same fiscal year, but first implementation strategy is considered compliant if it is approved by an authorized body within 4.5 months of its year-end (the same day the hospital’s Form 990 is initially due)

22. Implementation Strategy Execution

23. CHNA Change: Input from Underserved Population CHNA change: • Include input from medically underserved populations • now defined as “populations experiencing health disparities or at risk of not receiving adequate medical care as a result of being uninsured, underinsured, or due to geographic, language, financial, or other barriers”

26. CHNA Change: CHNA Reports and Strategies Available CHNA change: • Proposed regulations will require hospitals to make their CHNA reports and implementation strategies widely available to the public until the next two CHNA processes are completed — approximately six years; previous guidance only indicated a time period of approximately three years

28. Hospitals that recently have become subject to section 501(r) have until the end of the second tax year (after the status change) to complete their first CHNA.

29. Non-Compliance Penalties for Non-compliance • Penalties for failure to complete the CHNA: $50,000 excise tax and/or loss of 501(c)(3) status for failure in any area of 501(r) • For a health organization that operates multiple hospitals, and not all its hospitals are compliant with 501(r) - the overall organization and each hospital will maintain their 501(c)(3) status, but the noncompliant hospital’s activities will become fully taxable under the same rules and be taxed at rates that apply to for-profit C Corporations • IRS will decide whether to revoke a hospital’s 501(c)(3) status based on the relevant facts and circumstances, including: • The size, scope, nature, and significance of the failure; • Whether the failure is a repeat offense; • Whether the organization had followed procedures to facilitate overall compliance; • Whether the failure was corrected as promptly; • Whether the organization adjusted its procedures to avoid the failure in the future; and • Whether the hospital took corrective actions before the failure was caught by the IRS. • IRS providing two safe harbors for which a failure does not trigger consequences: an error or omission that is minor, inadvertent, and due to reasonable cause, will not be considered a failure if the hospital corrects it promptly; if a failure was neither willful nor egregious, if the hospital corrects the failure promptly, and if the hospital discloses the issue

30. Scott Dahl Business Development Director – East scott@healthycities.org 404-721-5964