CAHs' Community Benefit Activities: An Updated Review (FMT Briefing Paper #40)



The Medicare Rural Hospital Flexibility (Flex) Program supports the development of local systems of care with Critical Access Hospitals (CAHs) as the hubs, and the development of initiatives to address local population health priorities. This view of CAHs as central resources in rural health systems is consistent with the Internal Revenue Services’ (IRS) ongoing efforts to hold tax-exempt (501(c)3) hospitals, including tax-exempt CAHs, accountable for addressing the unmet needs of their communities through implementation of the IRS’ community benefit reporting framework in 2007 and the Affordable Care Act (ACA)-mandated community health needs assessment (CHNA) and financial assistance requirements. Many community benefit and hospital experts view these regulatory requirements as an opportunity to encourage tax-exempt hospitals to leverage their spending in these areas to improve the health of their communities. This brief examines community benefit data from the IRS Form 990, Return of Organization Exempt from Income Tax filings for a sample of 50 tax-exempt CAHs to understand how these hospitals are fulfilling their community benefit obligations and to describe the composition of their community benefit spending patterns. This brief updates the Flex Monitoring Team’s (FMT) prior study of the community benefit activities of CAHs and identifies opportunities for CAHs to strengthen their portfolio and reporting of community benefit activities. It also discusses how state Flex programs can support CAHs in meeting their community benefit obligations and address potential gaps in their compliance with the ACA-mandated CHNA financial assistance and billing requirements.


  • Over 94 percent of community benefit expenditures for the study Critical Access Hospitals (CAHs) was for direct patient care activities, compared to less than 6 percent for community-focused (e.g., community education or health improvement) activities.
  • Total community benefit spending among the study CAHs represented 8.4 percent of total hospital expenses; this was slightly higher than in previous studies.
  • Although nearly two-thirds of the study CAHs reported spending for community building activities, the level of spending was less than 1 percent of total hospital expenses.
  • Despite written financial, billing, and collection policies and efforts to publicize the availability of financial assistance to low income and uninsured patients, CAHs indicated high levels of bad debt suggesting they are not reaching patients eligible for financial assistance under their Financial Assistance Policies.
  • Although the hospitals’ financial assistance, billing, and collection policies align with IRS requirements, CAHs appear to need technical assistance in areas related to how they set the maximum amounts charged to patients eligible for financial assistance and how they identify and qualify these individuals for financial support.
  • State Flex programs can be a valuable source of technical assistance to improve CAH community benefit performance and better align their policies with the Affordable Care Act-mandated changes to the IRS tax code for financial assistance, billing, and collection practices.



Community Impact Health Systems