Schedule H - Hospitals

2011

Instructions for Schedule H
(Form 990)

Department of the Treasury
Internal Revenue Service

Hospitals
Contents
General Instructions . . . . . . . . . .
Purpose of Schedule . . . . . . . . .
Who Must File . . . . . . . . . . . . . .
Specific Instructions; Part I.
Financial Assistance and
Certain Other Community
Benefits at Cost . . . . . . . . . . .
Part II. Community Building
Activities . . . . . . . . . . . . . . . .
Part III. Bad Debt, Medicare, &
Collection Practices . . . . . . . . .
Part IV. Management
Companies and Joint Ventures
Part V. Facility Information . . . . .
Part VI. Supplemental
Information . . . . . . . . . . . . . . .
Worksheet 1. Financial
Assistance at Cost . . . . . . . . .
Worksheet 2. Ratio of Patient
Care Cost to Charges . . . . . . .
Worksheet 3. Unreimbursed
Medicaid and Other
Means-Tested Government
Programs . . . . . . . . . . . . . . . .
Worksheet 4. Community Health
Improvement Services and
Community Benefit Operations
Worksheet 5. Health Professions
Education . . . . . . . . . . . . . . . .
Worksheet 6. Subsidized Health
Services . . . . . . . . . . . . . . . . .
Worksheet 7. Research . . . . . . .
Worksheet 8. Cash and In-Kind
Contributions for Community
Benefit . . . . . . . . . . . . . . . . . .

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What’s New
Future developments. The IRS has
created a page on IRS.gov for information
about Form 990 and its instructions, at
www.irs.gov/form990. Information about
any future developments affecting Form
990 (such as legislation enacted after
publication of Schedule H) will be posted
on that page.
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
Note. Terms in bold are defined in the
Glossary of the Instructions for Form 990.
Background. The Patient Protection
and Affordable Care Act (Affordable Care
Act), enacted March 23, 2010, Pub. L.
No. 111-148, added section 501(r) to the
Code. Section 501(r) includes additional
Jan 17, 2012

requirements a hospital organization
must meet to qualify for tax exemption
under section 501(c)(3) in tax years
beginning after March 23, 2010. These
additional requirements address a
hospital organization’s financial
assistance policy, policy relating to
emergency medical care, billing and
collections, and charges for medical care.
Also, for tax years beginning after March
23, 2012, the Affordable Care Act
requires hospital organizations to conduct
community health needs assessments.
Because section 501(r) requires a
hospital organization to meet these
requirements for each of its hospital
facilities, Part V, Facility Information, has
been expanded to include a Section A,
Hospital Facilities. In this new section a
hospital organization must list its hospital
facilities; that is, its facilities that at any
time during the tax year, were required to
be licensed, registered, or similarly
recognized as a hospital under state law.
Part V also includes Section B, Facility
Policies and Practices, for reporting of
information on policies and practices
addressed in section 501(r). The hospital
organization must complete a separate
Section B for each of its hospital facilities
listed in Section A.
The community health needs
assessment requirements of section
501(r)(3) are effective for tax years
beginning after March 23, 2012.
Accordingly, the questions in Part V,
Section B, about community health needs
assessments (lines 1 through 7) are
optional for any tax year beginning before
March 24, 2012.
Section 6033(b)(15)(B) also requires
hospital organizations to submit a copy of
their audited financial statements to the
IRS. Accordingly, a hospital organization
that is required to file Form 990 must
attach a copy of its most recent audited
financial statements for the tax year to its
Form 990 (see instructions for Form 990,
Part IV, line 20b).
Section C, Part V, requires an
organization list all of its non-hospital
health care facilities that it operated
during the tax year, whether or not such
facilities were required to be licensed or
registered under state law. The
organization should not complete Part V,
Section B, for any of these non-hospital
facilities.
Cat. No. 51526B

Purpose of Schedule
Hospital organizations use Schedule H
(Form 990) to provide information on the
activities and policies of, and community
benefit provided by, its hospital facilities
and other non-hospital health care
facilities that it operated during the tax
year. This includes facilities operated
either directly or indirectly through
disregarded entities or joint ventures.

Who Must File
An organization that answered “Yes” on
Form 990, Part IV, line 20a must
complete and attach Schedule H to Form
990.
Schedule H (Form 990) must be
completed by a hospital organization
that operated during the tax year at least
one hospital facility. A hospital facility is
one that is required to be licensed,
registered, or similarly recognized by a
state as a hospital.
The organization must file a single
Schedule H (Form 990) that combines
information from:
1. Hospital facilities directly operated
by the organization.
2. Hospital facilities operated by
disregarded entities of which the
organization is the sole member.
3. Other health care facilities and
programs of the hospital organization or
any of the entities described in 1 or 2,
even if provided separately from the
hospital’s license.
4. Hospital facilities and other health
care facilities and programs operated by
any joint venture treated as a
partnership, to the extent of the hospital
organization’s proportionate share of the
joint venture.
Proportionate share is defined as the
ending capital account percentage listed
on the Schedule K-1 (Form 1065),
Partner’s Share of Income, Deductions,
Credits, etc., Part II, line J, for the
partnership tax year ending in the
organization’s tax year being reported on
the organization’s Form 990. If Schedule
K-1 (Form 1065) is not available, the
organization can use other business
records to make a reasonable estimate,
including the most recently available
Schedule K-1 (Form 1065), adjusted as
appropriate to reflect facts known to the
organization, or information used for
purposes of determining its proportionate
share of the venture for the organization’s
financial statements.

5. In the case of a group return filed
by the hospital organization, hospital
facilities operated directly by members of
the group exemption included in the
group return, hospital facilities operated
by a disregarded entity of which a
member included in the group return is
the sole member, hospital facilities
operated by a joint venture treated as a
partnership to the extent of the group
member’s proportionate share
(determined in the manner described in 4,
earlier), and other health care facilities or
programs of a member included in the
group return even if such programs are
provided separately from the hospital’s
license.
Example. The organization is the
sole member of a disregarded entity. The
disregarded entity owns 50% of a joint
venture treated as a partnership. The
partnership in turn owns 50% of another
joint venture treated as a partnership that
operates a hospital and a freestanding
outpatient clinic that is not part of the
hospital’s license. (Assume the
proportionate shares of the partnerships
based on capital account percentages
listed on the partnerships’ Schedule K-1
(Form 1065), Part II, line J, are also 50%.)
The organization would report 25% (50%
of 50%) of the hospital’s and outpatient
clinic’s combined information on Schedule
H (Form 990).
Note that while information from all the
above sources is combined for purposes
of Schedule H (Form 990), the
organization is required to report each of
its hospital facilities in Part V, Sections
A and B, whether operated directly by the
organization or indirectly through a
disregarded entity or joint venture treated
as a partnership. In addition, the
organization must list in Part V, Section
C, each of its other health care facilities
(for example, rehabilitation clinics, other
outpatient clinics, diagnostic centers,
skilled nursing facilities, long-term acute
care facilities that it operated during the
tax year), whether operated directly by
the organization or indirectly through a
disregarded entity or a joint venture
treated as a partnership.
Organizations are not to report
information from hospitals located outside
the United States in Parts I, II, III, or V.
Information from foreign joint ventures
and partnerships must be reported in Part
IV, Management Companies and Joint
Ventures. Information concerning foreign
hospitals and facilities can be described
in Part VI.
Except as provided in Part IV, do not
report on Schedule H (Form 990)
information from an entity organized as a
separate legal entity from the organization
and treated as a corporation for federal
income tax purposes (except for
members of a group exemption included
in a group return filed by the
organization), even if such entity is
affiliated with or otherwise related to the

organization (for example, part of an
affiliated health care system).
If an organization is not required to file
Form 990 but chooses to do so, it must
file a complete return and provide all of
the information requested, including the
required schedules.
An organization that does not operate
one or more facilities that satisfy the
definition of hospital facility, above,
should not file Schedule H (Form 990).
The definition of hospital for
TIP Schedule A (Form 990), Public
Charity Status and Public Support,
Part I, line 3, and the definition of hospital
for Schedule H (Form 990) are not the
same. Accordingly, an organization that
checks box 3 in Part I of Schedule A
(Form 990) to report that it is a hospital or
cooperative hospital service organization,
must complete and attach Schedule H to
Form 990 only if it meets the definition of
hospital facility for purposes of
Schedule H (Form 990), as explained
above.

Specific Instructions
Part I. Financial
Assistance and Certain
Other Community Benefits
at Cost
Part I requires reporting of financial
assistance policies, the availability of
community benefit reports, and the cost of
certain financial assistance and other
community benefit programs. Worksheets
and accompanying instructions are
provided at the end of the instructions to
this schedule to assist in completing the
table in Part I, line 7.
Line 1. A financial assistance policy,
sometimes referred to as a charity care
policy, is a policy describing how the
organization will provide financial
assistance at its hospital(s) and other
facilities, if any. Financial assistance
includes free or discounted health
services provided to persons who meet
the organization’s criteria for financial
assistance and are unable to pay for all or
a portion of the services. Financial
assistance does not include: bad debt or
uncollectible charges that the
organization recorded as revenue but
wrote off due to a patient’s failure to pay,
or the cost of providing such care to such
patients; the difference between the cost
of care provided under Medicaid or other
means-tested government programs or
under Medicare and the revenue derived
therefrom; or contractual adjustments with
any third-party payors.
Line 2. Check only one of the three
boxes. “Applied uniformly to all hospitals”
means that all of the organization’s
hospital facilities use the same financial
assistance policy. “Applied uniformly to
most hospitals” means that the majority of

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the organization’s hospital facilities use
the same financial assistance policy.
“Generally tailored to individual hospitals”
means that the majority of the
organization’s hospital facilities use
different financial assistance policies. If
the organization operates only one
hospital facility, check “Applied uniformly
to all hospitals.”
Line 3. Answer lines 3a, 3b, and 3c
based on the financial assistance
eligibility criteria that apply to (1) the
largest number of the organization’s
patients based on patient contacts or
encounters or (2) if the organization does
not operate its own hospital facility, the
largest number of patients of a hospital
facility operated by a joint venture in
which the organization has an ownership
interest. For example, if the organization
has two hospital facilities, use the
financial assistance eligibility criteria used
by the hospital facility which has the most
patient contacts or encounters during the
tax year.
Line 3a. “Federal Poverty Guidelines”
(FPG) are the Federal Poverty Guidelines
established by the U.S. Department of
Health and Human Services. If the
organization has established a family or
household income threshold that a patient
must meet or fall below to qualify for free
medical care, check the box in the “Yes”
column and indicate the specific threshold
by checking the appropriate box. For
instance, if a patient’s family or household
income must be less than or equal to
250% of FPG for the patient to qualify for
free care, then check the box marked
“Other” and enter “250%.”
Line 3b. If the organization has
established a family or household income
threshold that a patient must meet or fall
below to qualify for discounted medical
care, check the box in the “Yes” column
and indicate the specific threshold by
checking the appropriate box.
Line 3c. If applicable, describe the
other income-based criteria, asset test, or
other means test or threshold for free or
discounted care in Part VI, line 1 of this
schedule. An “asset test” includes (i) a
limit on the amount of total or liquid
assets that a patient or the patient’s
family or household can own for the
patient to qualify for free or discounted
care, and/or (ii) a criterion for determining
the level of discounted medical care
patients can receive, depending on the
amount of assets that they and/or their
families or households own.
Line 4. “Medically indigent” means
persons whom the organization has
determined are unable to pay some or all
of their medical bills because their
medical bills exceed a certain percentage
of their family or household income or
assets (for example, due to catastrophic
costs or conditions), even though they
have income or assets that otherwise
exceed the generally applicable eligibility
requirements for free or discounted care
under the organization’s financial
assistance policy.

Line 5. Answer lines 5a, 5b, and 5c
based on the organization’s budgeted
amounts under its financial assistance
policy.
Line 5a. Answer “Yes,” if the
organization established or had in place
at any time during the tax year an annual
or periodic budgeted amount of free or
discounted care to be provided under its
financial assistance policy. If “No,” skip to
line 6a.
Line 5b. Answer “Yes,” if the free or
discounted care the organization provided
in the applicable period exceeded the
budgeted amount of costs or charges for
that period. If “No,” skip to line 6a.
Line 5c. Answer “Yes,” if the
organization denied financial assistance
to any patient eligible for free or
discounted care under its financial
assistance policy or under any of its
hospital facilities’ financial assistance
policies solely because the organization’s
or the facility’s financial assistance budget
was exceeded.
Line 6. Answer lines 6a and 6b based
on the community benefit report that the
organization prepared for the organization
as a whole during the tax year.
Line 6a. Answer “Yes” if the
organization prepared a written report
during the tax year that describes the
organization’s programs and services that
promote the health of the community or
communities served by the organization.
If the organization’s community benefit
report is contained in a report prepared by
a related organization, answer “Yes”
and identify the related organization in
Part VI, line 1. If “No,” skip to line 7.
Line 6b. Answer “Yes” if the
organization made the community benefit
report it prepared during the tax year
available to the public.
Some of the ways in which an
TIP organization can make its
community benefit report available
to the public are to post the report on the
organization’s website, to publish and
distribute the report to the public by mail
or at its facilities, or to submit the report to
a state agency or other organization that
makes the report available to the public.
Lines 7a through 7k. Report on the
table (lines 7a through 7k), at cost, the
organization’s financial assistance and
certain other community benefits. Report
on line 7i contributions that the
organization restricts to one or more of
the community benefit activities listed in
lines 7a through 7h. Do not report such
contributions on lines 7a through 7h. To
calculate the amounts to be reported on
the table, use the worksheets or other
equivalent documentation that
substantiates the information reported
consistent with the methodology used on
the worksheets. See the instructions to
the worksheets for definitions of the
various types of community benefit (for
example, community health improvement

services, health professions education,
subsidized health services, research, etc.)
to be reported on lines 7a through 7k.
If the organization completed
TIP worksheets other than on an a
combined basis (for example,
facility by facility, joint venture by joint
venture), the organization should combine
all information from these worksheets for
purposes of reporting amounts on the
table. Only the portion of each joint
venture or partnership that represents
the organization’s proportionate share,
based on capital interest, can be reported
on lines 7a through 7k (see Purpose of
Schedule for instructions on aggregation).
Use the organization’s most accurate
costing methodology (cost accounting
system, cost-to-charge ratio, or other) to
calculate the amounts reported on the
table. If the organization uses a
cost-to-charge ratio, it can use Worksheet
2. Ratio of Patient Care Cost to Charges,
for this purpose. See the instructions for
Part VI, line 1, regarding an explanation
of the costing methodology used to
calculate the amounts reported on the
table.
If the organization included any costs
for a physician clinic as subsidized health
services on Part I, line 7g, report these
costs on Part VI, line 1.
If the organization included any bad
debt expense on Form 990, Part IX, line
25 but subtracted this bad debt for
purposes of calculating the amount
reported on line 7f, report this bad debt
expense on Part VI, line 1.
Do not report bad debt expense on
lines 7a through 7k.
The following are descriptions of the
type of information reported in each
column of the table.
Column (a). “Number of activities or
programs” means the number of the
organization’s activities or programs
conducted during the year that involve the
community benefit reported on the line.
Report each activity and program on only
one line so that it is not counted more
than once. Reporting in this column is
optional.
Column (b). “Persons served” means
the number of patient contacts or
encounters in accordance with the filing
organization’s records. Persons served
can be reported in multiple rows, as
services across different categories may
be provided to the same patient.
Reporting in this column is optional.
Column (c). “Total community benefit
expense” means the total gross expense
of the activity incurred during the year,
calculated by using the pertinent
worksheets for each line item. “Total
community benefit expense” includes
both “direct costs” and “indirect costs.”
“Direct costs” means salaries and
benefits, supplies, and other expenses

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directly related to the actual conduct of
each activity or program. “Indirect costs”
means costs that are shared by multiple
activities or programs, such as facilities
and administration costs related to the
organization’s infrastructure (space,
utilities, custodial services, security,
information systems, administration,
materials management, and others).
Column (d). “Direct offsetting
revenue” means revenue from the activity
during the year that offsets the total
community benefit expense of that
activity, as calculated on the worksheets
for each line item. “Direct offsetting
revenue” includes any revenue generated
by the activity or program, such as
payment or reimbursement for services
provided to program patients. Direct
offsetting revenue does not include
restricted or unrestricted grants or
contributions that the organization uses to
provide a community benefit.
Example. The organization receives
a restricted grant from an unrelated
organization that must be used by the
organization to provide financial
assistance. The amount of the restricted
grant is not reportable as direct offsetting
revenue on line 7a, column (d).
Column (e). “Net community benefit
expense” is “Total community benefit
expense” (column (c)) minus “Direct
offsetting revenue” (column (d)). If the
calculated amount is less than zero,
report the amount as a negative number.
Column (f). “Percent of total
expense” is the “net community benefit
expense” in column (e) divided by the
sum of the amount on Form 990, Part IX,
line 25, column (A) including the
organization’s proportionate share of total
expenses of all joint ventures in which it
has an ownership interest (see Appendix
F). Report the percentage to two decimal
places (x.xx%). If the net community
benefit expense in column (e) is a
negative number, report -0- in column (f)
rather than a negative percentage. Any
bad debt expense included in the
denominator should be removed before
calculation, and the amount of bad debt
expense that was included on Form 990,
Part IX, line 25, column (A) but removed
from this figure should be reported in Part
VI, line 1.
Column (f) “percent of total
TIP expense” is based on column (e)
“net community benefit expense,”
rather than column (c) “total community
benefit expense.” Organizations that
report amounts of direct offsetting
revenue also might wish to report total
community benefit expense (Part I, line 9,
column (c)) as a percentage of total
expenses. Although this percentage
cannot be reported in Part I, line 7,
column (f), it can be reported on Schedule
H (Form 990), Part VI, line 1.

Optional Worksheets for
Part I, Line 7 (Financial
Assistance and Certain
Other Community Benefits
At Cost)
Worksheets 1 through 8 are intended to
assist the organization in completing
Schedule H (Form 990), Part I, lines 7a
through 7k. Use of the worksheets is not
required and they should not be filed with
Form 990. The organization can use
alternative equivalent documentation,
provided that the methodology described
in these instructions (including the
instructions to the worksheets) is
followed. Regardless of whether the
worksheets or alternative equivalent
documentation is used to compile and
report the required information, such
documentation must be retained by the
organization to substantiate the
information reported on Schedule H
(Form 990). The worksheets or alternative
equivalent documentation are to be
completed using the organization’s most
accurate costing methodology, which can
include a cost accounting system,
cost-to-charge ratios, a combination
thereof, or some other method.
If the organization is filing a group
return or has a disregarded entity or an
ownership interest in one or more joint
ventures, the organization may find it
helpful to complete the worksheets
separately for the organization and for
each disregarded entity, joint venture in
which the organization had an ownership
interest during the tax year, and group
affiliate. In that case, the organization
should combine all information from the
worksheets for purposes of completing
line 7. Complete the table by combining
ing amounts from the organization’s
worksheets, amounts from disregarded
entities or group affiliates, and amounts
from joint ventures that are attributable to
the organization’s proportionate share of
each joint venture, under the aggregation
instruction in Purpose of Schedule.
See Worksheets 1 through 8 and
specific instructions for the worksheets
later in these instructions.

Part II. Community
Building Activities
Report in this part the costs of the
organization’s activities that it engaged in
during the tax year to protect or improve
the community’s health or safety, and that
are not reportable in Part I of this
schedule. Some community building
activities may also meet the definition of
community benefit. Do not report in Part II
community building costs that are
reported on Part I, line 7 as community
benefit (costs of a community health
improvement service reportable on Part I,
line 7e). An organization that reports
information in this Part II must describe in

Part VI how its community building
activities promote the health of the
communities it serves.
If the filing organization makes a grant
to an organization to be used to
accomplish one of the community building
activities listed in this part, then the
organization should include the amount of
the grant on the appropriate line in Part II.
If the organization makes a grant to a
joint venture in which it has an
ownership interest to be used to
accomplish one of the community building
activities listed in this part, report the
grant on the appropriate line in Part II, but
do not include in Part II the organization’s
proportionate share of the amount spent
by the joint venture on such activities, to
avoid double counting. Do not include any
contribution made by the organization that
was funded in whole or in part by a
restricted grant, to the extent that such
grant was funded by a related
organization.
Line 1. “Physical improvements and
housing” include, but are not limited to,
the provision or rehabilitation of housing
for vulnerable populations, such as
removing building materials that harm the
health of the residents, neighborhood
improvement or revitalization projects,
provision of housing for vulnerable
patients upon discharge from an inpatient
facility, housing for low-income seniors,
and the development or maintenance of
parks and playgrounds to promote
physical activity.
Line 2. “Economic development” can
include, but is not limited to, assisting
small business development in
neighborhoods with vulnerable
populations and creating new
employment opportunities in areas with
high rates of joblessness.
Line 3. “Community support” can
include, but is not limited to, child care
and mentoring programs for vulnerable
populations or neighborhoods,
neighborhood support groups, violence
prevention programs, and disaster
readiness and public health emergency
activities, such as community disease
surveillance or readiness training beyond
what is required by accrediting bodies or
government entities.
Line 4. “Environmental improvements”
include, but are not limited to, activities to
address environmental hazards that affect
community health, such as alleviation of
water or air pollution, safe removal or
treatment of garbage or other waste
products, and other activities to protect
the community from environmental
hazards. The organization cannot include
on this line or in this part expenditures
made to comply with environmental laws
and regulations that apply to activities of
itself, its disregarded entity or entities, a
joint venture in which it has an
ownership interest, or a member of a
group exemption included in a group

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return of which the organization is also a
member. Similarly, the organization
cannot include on this line or in this part
expenditures made to reduce the
environmental hazards caused by, or the
environmental impact of, its own
activities, or those of its disregarded
entities, joint ventures, or group
exemption members, unless the
expenditures are for an environmental
improvement activity that (i) is provided
for the primary purpose of improving
community health; (ii) addresses an
environmental issue known to affect
community health; and (iii) is subsidized
by the organization at a net loss. Such
expenditures may not be reported on this
line if the organization engages in the
activity primarily for marketing purposes.
Line 5. “Leadership development and
training for community members”
includes, but is not limited to, training in
conflict resolution; civic, cultural, or
language skills; and medical interpreter
skills for community residents.
Line 6. “Coalition building” includes, but
is not limited to, participation in
community coalitions and other
collaborative efforts with the community to
address health and safety issues.
Line 7. “Community health improvement
advocacy” includes, but is not limited to,
efforts to support policies and programs
to safeguard or improve public health,
access to health care services, housing,
the environment, and transportation.
Line 8. “Workforce development”
includes, but is not limited to, recruitment
of physicians and other health
professionals to medical shortage areas
or other areas designated as
underserved, and collaboration with
educational institutions to train and recruit
health professionals needed in the
community (other than the health
professions education activities reported
in Part I, line 7f).
Line 9. “Other” refers to community
building activities that protect or improve
the community’s health or safety that are
not described in the categories listed in
lines 1 through 8 above.
Refer to the instructions to Part I, line
7, columns (a) through (f), for descriptions
of the types of information that should be
reported in each column of Part II.
If the organization is filing a group
return or has a disregarded entity or an
ownership interest in one or more joint
ventures, the organization may find it
helpful to complete Part II separately for
itself and for each disregarded entity, joint
venture in which the organization had an
ownership interest during the tax year,
and group affiliate. The organization
should combine the amounts from all
such tables, according to the combined
instructions in Purpose of Schedule, and
include the combined information in Part
II.

Part III. Bad Debt,
Medicare, & Collection
Practices
Section A. In this section (a) report
combined bad debt expense; (b) provide
an estimate of how much bad debt
expense, if any, reasonably could be
attributable to persons who likely would
qualify for financial assistance under its
financial assistance policy; and (c)
provide a rationale for what portion of bad
debt, if any, the organization believes is
community benefit. In addition, the
organization must report whether it has
adopted Healthcare Financial
Management Association Statement No.
15, Valuation and Financial Statement
Presentation of Charity Care and Bad
Debts by Institutional Healthcare
Providers (“Statement 15”) and provide
the text of its footnote, if applicable, to its
audited financial statements that
describes the bad debt expense.
Line 1. Indicate if the organization
reports bad debt expense in accordance
with Statement 15.
Note. Statement 15 has not been
adopted by the AICPA. The IRS does not
require organizations to adopt Statement
15 or use it to determine bad debt
expense or financial assistance costs.
Some organizations may rely on
Statement 15 in reporting bad debt
expense and financial assistance in their
audited financial statements. Statement
15 provides instructions for
recordkeeping, valuation, and disclosure
for bad debts.
Line 2. Use the most accurate
system and methodology available to the
organization to report bad debt expense.
If only a portion of a patient’s bill for
services is written off as a bad debt,
include only the proportionate amount
attributable to the bad debt. Include the
organization’s proportionate share of the
bad debt expense of joint ventures in
which it had an ownership interest during
the tax year.
Line 3. Provide an estimate of the
amount of bad debt reported on line 2 that
reasonably is attributable to patients who
likely would qualify for financial
assistance under the hospital’s financial
assistance policy as reported in Part I,
lines 1 through 4, but for whom
insufficient information was obtained to
determine their eligibility. Do not include
this amount in Part I, line 7.
Organizations can use any reasonable
methodology to estimate this amount,
such as record reviews, an assessment of
financial assistance applications that were
denied due to incomplete documentation,
analysis of demographics, or other
analytical methods.
Line 4. In Part VI:
1. Describe the methodology used in
determining the amount reported on line 2
as bad debt, including how the

organization accounts for discounts and
payments on patient accounts in
determining bad debt expense.
2. Describe the methodology used to
determine the amount reported on line 3.
3. Describe the rationale, if any, for
including any portion of bad debt as
community benefit.
4. Provide the footnote from the
organization’s financial statements on
bad debt expense, if applicable, or the
footnotes related to “accounts receivable,”
“allowance for doubtful accounts,” or
similar designations. If the footnote or
footnotes address only the filing
organization’s bad debt expense or
“accounts receivable,” “allowance for
doubtful accounts,” or similar
designations, provide the exact wording
of the footnote or footnotes.
If the organization’s financial statements
include a footnote on these issues that
also includes other information, report in
Part VI only the relevant portions of the
footnote. If the organization is a member
of a group with consolidated financial
statements, the organization can
summarize that portion, if any, of the
footnote or footnotes that apply. If the
organization’s financial statements do not
include a footnote that discusses bad
debt expense, “accounts receivable,”
“allowance for doubtful accounts,” or
similar designations, include a statement
in Part VI that the organization’s audited
financial statements do not include a
footnote discussing these issues and
explain how the organization’s financial
statements account for bad debt, if at all.
Section B. In this section report (a)
combine allowable costs to provide
services reimbursed by Medicare, (b)
combine Medicare reimbursements
attributable to such costs, and (c)
combine Medicare surplus or shortfall.
Include in Section B only those allowable
costs and Medicare reimbursements that
are reported in the organization’s
Medicare Cost Report(s) for the year,
including its share of any such allowable
costs and reimbursement from
disregarded entities and joint ventures
in which it has an ownership interest. The
organization should in Part VI describe
what portion of its Medicare shortfall, if
any, it believes should constitute
community benefit, and explain its
rationale for its position. As described
below, the organization also can enter in
Part VI the amount of any Medicare
revenues and costs not included in its
Medicare Cost Report(s) for the year, and
can enter a reconciliation of the amounts
reported in Section B (including the
surplus or shortfall reported on line 7) and
the total revenues and costs attributable
to all of the organization’s Medicare
programs.
Line 5. Enter all net patient service
revenue (for Medicare fee for service
(FFS) patients) associated with allowable
costs the organization reports in its
Medicare Cost Report(s) for the year,

-5-

including payments for indirect medical
education (IME) (except for Medicare
Advantage IME), Medicare
disproportionate share hospital (DSH)
revenue, coinsurance, patient
deductibles, outliers, capital, bad debt,
and any other amounts paid to the
organization on the basis of its Medicare
Cost Report. Do not include revenue
related to subsidized health services as
reported in Part I, line 7g (see Worksheet
6), or direct graduate medical education
(GME) as reported in Part I, line 7f (see
Worksheet 5). If the organization has
more than one Medicare provider
number, combine the revenue attributable
to costs reported on the Medicare Cost
Reports submitted under each provider
number, and report the combined
revenues on line 5.
Line 6. Enter all Medicare allowable
costs reported in the organization’s
Medicare Cost Report(s), except those
already reported in Part I, line 7g
(subsidized health services) and costs
associated with direct GME already
reported in Part I, line 7f (health
professions education). This can be
determined using Worksheet A. If
Worksheet A is not used, the organization
still must subtract the costs attributable to
subsidized health services and direct
GME from the Medicare allowable costs it
enters on line 6. If the organization has
more than one Medicare provider
number, it should combine the costs
reported in the Medicare Cost Reports
submitted under each provider number
and report the combined costs on line 6.
Worksheet A (optional)
Complete Worksheets 5 and 6 before
completing this Worksheet A.
1.
2.
3.

4.
5.

Total Medicare allowable costs
(from Medicare Cost Report)
Total Medicare allowable costs
(from line 1) included in
Worksheet 6, line 3, col. (A)
Total Medicare allowable costs
(from line 1) included in
Worksheet 5, line 8 (direct
GME) . . . . . . . . . . . . . . . .
Total adjustments to Medicare
allowable costs (add lines 2
and 3) . . . . . . . . . . . . . . . .
Total Medicare allowable costs
(line 1 minus line 4).
Enter this value in Part III, line
6. . . . . . . . . . . . . . . . . . . .

$
$

$
$

$

Line 7. Subtract line 6 from the
amount on line 5. If line 6 exceeds line 5,
report the excess (the shortfall) as a
negative number.
Line 8. Check the box that best
describes the costing methodology used
to determine the Medicare allowable
costs reported in the organization’s
Medicare Cost Report(s), as reflected on
line 6. Describe this methodology in Part
VI.
The organization must also describe in
Part VI its rationale for treating the
amount reported in Part III, line 7, or any

portion of it, as a community benefit. An
organization’s rationale must have a
reasonable basis. Do not include this
amount in Part I, line 7. Do not include
any Medicare-related expenses or
revenue properly reported in Part I, line
7g or any Medicare-related expenses or
revenue reported in Part I, line 7f in Part
III, Section B.
Lines 5, 6, and 7 do not include
TIP certain Medicare program
revenues and costs, and thus
cannot reflect all of the organization’s
revenues and costs associated with its
participation in Medicare programs. The
organization can describe in Part VI the
Medicare revenues and costs not
included in its Medicare Cost Report(s)
for the year (for example, revenues and
costs for freestanding ambulatory surgery
centers, physician services billed by the
organization, clinical laboratory services,
and revenues and costs of Medicare Part
C and Part D programs). The organization
can enter in Part VI, line 1 a reconciliation
of amounts reportable in Section B
(including the surplus or shortfall reported
on line 7) and all of the organization’s
total revenues and total expenses
attributable to Medicare programs.
If the organization received any prior
year settlements for Medicare-related
services in the current tax year, it can
provide an explanation in Part VI, line 1.
Section C. In this section report the
organization’s written debt collection
policy.
Line 9a. Answer “Yes” if the
organization had a written debt collection
policy on the collection of amounts owed
by patients during its tax year.
For purposes of Line 9a, a “written
debt collection policy” includes a written
billing and collections policy, or in the
case of an organization that does not
have a separate written billing and
collections policy, a written financial
assistance policy that includes the actions
the organization may take in the event of
non-payment, including collection actions
and reporting to credit agencies.
Line 9b. Answer “Yes” if the
organization’s written debt collection
policy that applied to the facilities that
served the largest number of the
organization’s patients during the tax
year contained provisions for collecting
amounts due from those patients who the
organization knows qualify for financial
assistance. If the organization answers
“Yes,” describe in Part VI the collection
practices that it follows for such patients,
whether or not such practices apply
specifically to such patients or more
broadly to also cover other types of
patients.

Part IV. Management
Companies and Joint
Ventures
List any management company, joint
venture, or other separate entity (whether

treated as a partnership or a corporation),
including joint ventures outside of the
United States, of which the organization
is a partner or shareholder,
1. In which persons described in 1a
and/or 1b below owned, in the aggregate,
more than 10% of the share of profits of
such partnership or LLC interest, or stock
of the corporation:
a. Persons who were officers,
directors, trustees, or key employees
of the organization at any time during the
organization’s tax year, and
b. Physicians who were employed as
physicians by, or had staff privileges with,
one or more of the organization’s
hospitals; and
2. That either:
a. Provided management services
used by the organization in its provision of
medical care, or
b. Provided medical care, or owned or
provided real property, tangible personal
property, or intangible property used by
the organization or by others to provide
medical care.
Examples of such joint ventures and
management companies include:
• An ancillary joint venture formed by the
organization and its officers or physicians
to conduct an exempt or unrelated
business activity,
• A company owned by the organization
and its officers or physicians that owns
and leases to the organization a hospital
or other medical care facility, and
• A company that owns and leases to
entities other than the organization
diagnostic equipment or intellectual
property used to provide medical care.
For purposes of Part IV, ownership
interests can be direct or indirect. For
example, if a joint venture reported in Part
IV is owned, in part, by a physician group
practice owned by staff physicians of the
organization’s hospital, report the
physicians’ indirect ownership interest in
the joint venture in proportion to their
ownership share of the physician group
practice.
Note. Do not include publicly traded
entities or entities whose sole income is
passive investment income from interest
or dividends.
For purposes of Part IV, the aggregate
percentage share of profits or stock
ownership percentage of officers,
directors, trustees, key employees, and
physicians who are employed as
physicians by, or have staff privileges
with, one or more of the organization’s
hospitals is measured as of the earlier of
the close of the tax year of the
organization or the last day the
organization was a member of the joint
venture. All stock, whether common or
preferred, is considered stock for
purposes of determining the stock
ownership percentage. Provide all the
information requested below for each
such entity.

-6-

Column (a). Enter the full legal name of
the entity.
Column (b). Describe the primary
business activity or activities conducted
by the management company, joint
venture, or separate entity.
Column (c). Enter the organization’s
percentage share of profits in the
partnership or LLC, or stock in the entity
that is owned by the organization.
Column (d). Enter the percentage share
of profits or stock in the entity owned by
all of the organization’s current officers,
directors, trustees, or key employees.
Column (e). Enter the percentage share
of profits or stock in the entity owned by
all physicians who are employees
practicing as physicians or who have staff
privileges with one or more of the
organization’s hospitals.
If a physician described above is also
a current officer, director, trustee, or key
employee of the organization, include his
or her profits or stock percentage in
column (d). Do not include this in column
(e).
Part IV can be duplicated if more
space is needed to list additional
management companies and joint
ventures.

Part V. Facility Information
In Part V, the organization must list all of
its hospital facilities in Section A,
complete a separate Section B for each of
its hospital facilities listed in Section A,
and list its non-hospital health care
facilities in Section C.
Section A. Complete Part V, Section A,
by listing all of the organization’s hospital
facilities that it operated during the tax
year. List these facilities in order of size
from largest to smallest, measured by a
reasonable method (for example, the
number of patients served or total
revenue per facility). “Hospital facilities”
are facilities that, at any time during the
tax year, were required to be licensed,
registered, or similarly recognized as a
hospital under state law. A hospital facility
is operated by an organization whether
the facility is operated directly by the
organization or indirectly through a
disregarded entity or joint venture
treated as a partnership. For each
hospital facility, list its name and address
and check the applicable column(s).
“Licensed hospital” is a facility
licensed, registered, or similarly
recognized by a state as a hospital.
“General medical and surgical” refers
to a hospital primarily engaged in
providing diagnostic and medical
treatment (both surgical and nonsurgical)
to inpatients with a wide variety of
medical conditions, and that may provide
outpatient services, anatomical pathology
services, diagnostic X-ray services,
clinical laboratory services, operating
room services, and pharmacy services.
“Children’s hospital” is a center for
provision of health care to children, and

includes independent acute care
children’s hospitals, children’s hospitals
within larger medical centers, and
independent children’s specialty and
rehabilitation hospitals.
“Teaching hospital” is a hospital that
provides training to medical students,
interns, residents, fellows, nurses, or
other health professionals and providers,
provided that such educational programs
are accredited by the appropriate national
accrediting body.
“Critical access hospital” (CAH) is a
hospital designated as a CAH by a state
that has established a State Medicare
Rural Hospital Flexibility Program in
accordance with Medicare rules.
“Research facility” is a facility that
conducts research.
“ER – 24 hours” refers to a facility that
operates an emergency room 24 hours a
day, 365 days a year.
“ER – other” refers to a facility that
operates an emergency room for periods
less than 24 hours a day, 365 days a
year.
Complete the “Other (Describe)”
column for each hospital facility that the
organization operates that is not
described in the other columns of Part V,
Section A.
In the upper left hand corner of the
Part V, Section A table, list the total
number of hospital facilities that the
organization operated during the tax year.
If the organization needs additional
space to list all of its hospital facilities, it
should duplicate Section A and use as
many duplicate copies of Section A as
needed, number each page, and
renumber the line numbers in the left
hand margin (an organization with 15
facilities should renumber lines 1-5 on the
2nd page as lines 11-15).
Section B. Section B requires reporting
on a hospital facility by hospital facility
basis. The organization must complete
Section B for each of its hospital facilities
listed in Section A. At the top of Section
B, list the name of the hospital facility and
its line number from Section A.
References in these Section B
instructions to a “hospital facility” taking a
certain action mean that the organization
took action through or on behalf of the
hospital facility.
Lines 1 through 7. These lines are
optional for tax year 2011. A community
health needs assessment (“Needs
Assessment”) is an assessment of the
health needs of the community. To meet
the requirements of section 501(r)(3),
which is effective for tax years beginning
after March 23, 2012, a Needs
Assessment must take into account input
from persons who represent the broad
interests of the community served by the
hospital facility, including those with
special knowledge of or expertise in
public health, and must be made widely
available to the public. Once section
501(r)(3) is effective, each hospital

facility will be required to conduct a
Needs Assessment at least once every
three years, and adopt an implementation
strategy to meet the community health
needs identified through such
assessment.
Line 1. Answer “Yes” if the hospital
facility conducted a Needs Assessment
in the current tax year or in any prior tax
year. If “Yes,” indicate what the Needs
Assessment describes by checking all
applicable boxes. If the Needs
Assessment describes information that
does not have a corresponding checkbox,
check line 1j, “Other,” and describe this
information in Part VI. If “No,” skip to line
8.
Line 1i. “Information gaps that limit
the hospital facility’s ability to assess
the community’s health needs” are areas
where additional information is needed to
assess whether a particular health need
exists.
Line 3. If “Yes,” describe in Part VI
how the hospital facility took into account
input from persons who represent the
community served by the hospital facility,
including a description of how it consulted
with these persons (whether through
meetings, focus groups, interviews,
surveys, written correspondence, etc.).
Identify in Part VI any organizations and
other groups that the hospital facility
consulted in conducting its most recent
Needs Assessment. Individual members
of community forums, focus groups,
survey groups, and similar groups do not
need to be listed.
Line 4. Answer “Yes,” if the hospital
facility’s Needs Assessment was
conducted with one or more other hospital
facilities. “One or more other hospital
facilities” includes related and unrelated
hospital facilities. If “Yes,” list in Part VI
the other hospital facilities with which the
hospital facility conducted its Needs
Assessment.
Line 5. Answer “Yes,” if the hospital
facility made its most recently conducted
Needs Assessment widely available to
the public. If “Yes,” indicate how the
hospital facility made the Needs
Assessment widely available to the public
by checking all applicable boxes. If the
hospital facility made the Needs
Assessment widely available to the public
by means other than those listed in lines
5a and 5b, check line 5c, “Other,” and
describe these means in Part VI.
Line 5a. Check this box if the Needs
Assessment was made available on the
hospital facility’s website or the hospital
organization’s website. This box may also
be checked if the hospital facility made its
Needs Assessment available on a
website established and maintained by
another entity. If line 5a is checked, list in
Part VI the direct website address, or url,
where the Needs Assessment can be
accessed.
Line 6. Check all applicable boxes for
lines 6a through 6h to show how the
hospital facility addressed the needs

-7-

identified in its most recently conducted
Needs Assessment. If the hospital facility
addressed the needs identified in its most
recently conducted Needs Assessment by
means other than those listed in lines 6a
through 6h, check the box for line 6i,
“Other,” and describe these means in Part
VI. If the hospital facility has not
addressed any of the needs identified in
its most recently conducted Needs
Assessment, skip to line 7.
Line 6a. Check this box if the hospital
facility adopted an implementation
strategy that addresses each of the
community health needs identified
through the Needs Assessment by either
(1) describing how the facility plans to
meet the health need; or (2) identifying
the health need as one the hospital facility
does not intend to meet, and explaining
why the hospital facility does not intend to
meet that health need.
Line 6b. Check the box if the hospital
facility has begun, continued, or
completed execution of its implementation
strategy.
Line 6c. Check this box if the hospital
facility collaborated with others in the
hospital facility’s community to develop a
written description of the activities that
hospital facilities and other community
groups and public health agencies plan to
undertake collectively to address specific
health needs in their community.
Line 6d. Check this box if the
hospital facility collaborated with others
in the hospital facility’s community to
carry out activities that hospital facilities
and other community groups and public
health agencies planned to undertake
collectively to address specific health
needs in their community.
Line 7. Answer “Yes,” if the hospital
facility took action to address all of the
needs identified in its most recently
conducted Needs Assessment. If “No,”
explain in Part VI which community health
needs the hospital facility did not take
action to address and the reasons why it
did not take action to address such
needs. For example, a hospital facility
might identify limited financial or other
resources as reasons why it did not take
action to address a need identified in its
most recently conducted Needs
Assessment.
Lines 8 through 14. See the
instructions for Part I, Line 1 of Schedule
H (Form 990) for the definition of
“financial assistance policy.”
Line 8. Answer “Yes,” if, during the tax
year, the hospital facility had a written
financial assistance policy that explains
eligibility criteria for financial assistance,
and whether such assistance includes
free or discounted care.
Line 9. See the instructions for Part I,
Line 3a of Schedule H (Form 990), for the
definition of “Federal Poverty Guidelines”
(FPG). Answer “Yes,” if, during the tax
year, the hospital facility had a written
financial assistance policy that used FPG
for determining eligibility for free medical

care, and show the specific threshold by
writing in the percentage amount. If “No,”
explain in Part VI what criteria the hospital
facility used to determine eligibility for free
care, or state that the hospital facility did
not provide any free care.
Line 10. See the instructions for Part I,
Line 3a of Schedule H (Form 990) for the
definition of “Federal Poverty Guidelines”
(FPG). Answer “Yes”, if, during the tax
year, the hospital facility had a written
financial assistance policy that used FPG
for determining eligibility for discounted
medical care, and show the specific
threshold by writing in the percentage
amount. If “No,” explain in Part VI what
criteria the hospital facility used to
determine eligibility for discounted care,
or state that the hospital facility did not
provide any discounted care.
Line 11. Answer “Yes,” if, during the
tax year, the hospital facility had a
written financial assistance policy that
explained the basis for calculating
amounts charged to patients. If “Yes,”
indicate the factors used in calculating
amounts charged to patients, including
factors used in determining eligibility for
any discounts, by checking all applicable
boxes. If the hospital facility calculated
amounts charged to patients using factors
other than those listed in lines 11a
through 11g, check the box for line 11h,
“Other,” and describe these factors in Part
VI.
Line 11a. Check this box if the
hospital facility used the income level of
patients, patients’ families, or patients’
guarantors as a factor in calculating
amounts charged to patients.
Line 11b. Check this box if the
hospital facility used the asset level of
patients, patients’ families, or patients’
guarantors as a factor in calculating
amounts charged to patients.
Line 11c. Check this box if the
hospital facility considered whether
patients were “medically indigent,” as
defined in the instructions for Part I, Line
4 of Schedule H (Form 990), in
calculating amounts charged to patients
during the tax year.
Line 11d. Check this box if the
hospital facility used the insurance
status of patients, patients’ families, or
patients’ guarantors as a factor in
calculating amounts charged to patients.
Line 11h. “Other” factors used in
determining amounts charged to patients
may include, but are not limited to, the
amount budgeted for financial assistance.
Line 12. Answer “Yes,” if, during the
tax year, the hospital facility had a
written financial assistance policy that
explained the method for applying for
financial assistance.
Line 13. Answer “Yes,” if, during the
tax year, the hospital facility had a
written financial assistance policy that
included measures to publicize the policy
within the community served by the
hospital facility. If “Yes,” indicate how the

hospital facility publicized the policy by
checking all applicable boxes. If the
hospital facility publicized the policy within
the community served by the hospital
facility by means that are not listed in
lines 13a-13f, check line 13g, “Other,” and
describe in Part VI how the financial
assistance policy was publicized within
the community served by the hospital
facility.
Line 13g. “Other” measures to
publicize the policy within the community
served by the hospital facility may
include, but are not limited to, having
registration personnel refer uninsured
and/or low income patients to financial
counselors to discuss the policy. Check
the box for line 13g if, instead of the
detailed policy, the hospital facility
provided a summary of the policy in a
manner listed in lines 13a-f.
Line 14. Answer “Yes,” if, during the
tax year, the hospital facility had either
a separate written billing and collections
policy or a written financial assistance
policy (“FAP”) that explained actions the
hospital facility may take upon
non-payment under its policy, including,
but not limited to, the actions listed in
lines 15 and 16, if applicable.
Lines 15 and 16. “Other similar
actions” do not include sending the
patient a bill.
Note: Section 501(r)(6) requires a
hospital facility to forego extraordinary
collections actions before the facility has
made reasonable efforts to determine the
patient’s eligibility under the facility’s FAP.
No inference should be made regarding
whether the actions listed in lines 15a
through 15d, 16a through 16d, or
described in Part VI as “other similar
actions,” are “extraordinary collection
actions.”
Line 15. Indicate what actions against
a patient the hospital facility was
permitted to take during the tax year
under its policies before making
reasonable efforts to determine the
patient’s eligibility under the facility’s FAP
by checking all applicable boxes. If a
hospital facility’s policies permitted the
facility to take an action or actions against
a patient during the tax year similar to
those listed in lines 15a through 15d
before making reasonable efforts to
determine the patient’s eligibility under
the facility’s FAP, check line 15e, “Other
similar actions,” and describe those
actions in Part VI.
Line 15e. If the organization checked
line 15e, describe the other similar
actions that the hospital facility was
permitted to take under its policies during
the tax year before making reasonable
efforts to determine the individual’s
eligibility under the hospital facility’s FAP.
Line 16. Answer “Yes” if the hospital
facility or an authorized third party
performed any of the actions listed in
lines 16a through 16d during the tax year
before making reasonable efforts to
determine the individual’s eligibility under

-8-

the facility’s FAP. If “Yes,” indicate the
actions the hospital facility or an
authorized third party performed before
making reasonable efforts to determine
the individual’s eligibility under the
facility’s FAP by checking all applicable
boxes. If the hospital facility or an
authorized third party performed actions
similar to those listed in lines 16a through
16d before making reasonable efforts to
determine the individual’s eligibility under
the facility’s FAP, answer “Yes,” check
the box for line 16e, “Other similar
actions,” and describe those actions in
Part VI.
Line 17. Indicate which efforts the
hospital facility took before initiating any
of the actions checked in lines 16a
through 16d or described in Part VI by
checking all applicable boxes in lines 17a
through 17d. If the hospital facility made
efforts other than those listed in lines 17a
through 17d before initiating any of the
actions checked in lines 16a through 16d
or described in Part VI, check the box for
line 17e, “Other,” and describe in Part VI.
If the hospital facility made no such
efforts before initiating any of the actions
checked in lines 16a through 16d or
described in Part VI, check the box for
line 17e, “Other,” and state in Part VI that
the hospital facility made no such efforts.
Line 17c. The term “communications”
includes, but is not limited to, in-person
interactions, telephone calls, and
invoices.
Line 18. Answer “Yes,” if, during the
tax year, the hospital facility had in
place a written policy about emergency
medical care that required the hospital
facility to provide, without discrimination,
care for emergency medical conditions to
individuals without regard to their
eligibility under the hospital facility’s
financial assistance policy. If “No,”
indicate the reasons why the hospital
facility did not have a written
nondiscriminatory policy relating to
emergency medical care by checking all
applicable boxes. If the reason the
hospital facility did not have a written
nondiscriminatory policy relating to
emergency medical care is not listed in
lines 18a through 18c, check line 18d,
“Other,” and describe the reason(s) in
Part VI.
The hospital facility may check “Yes” if
it had a written policy that required
compliance with 42 U.S.C. 1395dd
(Emergency Medical Treatment and
Active Labor Act ( EMTALA)).
For purposes of line 18, the term
“emergency medical conditions” means:
(A) a medical condition manifesting itself
by acute symptoms of sufficient severity
(including severe pain) such that the
absence of immediate medical attention
could reasonably be expected to result
in-1. placing the health of the individual
(or, for a pregnant woman, the health of

the woman or her unborn child) in serious
jeopardy,
2. serious impairment to bodily
functions, or
3. serious dysfunction of any bodily
organ or part; or
(B) for a pregnant woman who is
having contractions-1. that there is inadequate time to
effect a safe transfer to another hospital
before delivery, or
2. that transfer may pose a threat to
the health or safety of the woman or the
unborn child.
Lines 19-21: For purposes of lines
19-21, the term “FAP-eligible” means
eligible for assistance under the hospital
facility’s financial assistance policy.
Line 19. Indicate how the hospital
facility determined, during the tax year,
the maximum amounts that can be
charged to FAP-eligible individuals for
emergency or other medically necessary
care by checking the appropriate box.
Note: Under Section 501(r)(5), the
maximum amounts that can be charged
to FAP-eligible individuals for emergency
or other medically necessary care are the
amounts generally billed to individuals
who have insurance covering such care.
Line 20. Answer “Yes,” if, during the
tax year, the hospital facility charged
any FAP-eligible individual to whom the
hospital facility provided emergency or
other medically necessary services more
than the amounts generally billed to
individuals who had insurance covering
such care. If “Yes,” explain in Part VI.
The hospital facility may check “No”
if it charged more than the amounts
generally billed to individuals who had
insurance covering such care to an
individual whom the hospital facility did
not know was FAP-eligible at the time of
billing, if the hospital facility corrected the
bill within a reasonable period of time
after learning the individual was eligible.
Line 21. Answer “Yes,” if, during the
tax year, the hospital facility charged
any of its FAP-eligible individuals an
amount equal to the gross charge for any
service provided to that individual, and
explain in Part VI the circumstances in
which it used gross charges. A bill that
itemizes a reduction applied to a gross
charge for a service does not need to be
reported if the amount charged to the
individual for such service is less than the
amount of the gross charge.
The hospital facility may check “No” if
it charged gross charges to an individual
the hospital facility did not know was
FAP-eligible at the time of billing, if the
hospital facility corrected the bill within a
reasonable period of time after learning
the individual was eligible.
Section C. Complete Part V, Section C,
by listing all of the non-hospital health
care facilities that the organization
operated during the tax year. A facility is
operated by an organization whether it is

operated directly by the organization or
indirectly through a disregarded entity or
joint venture treated as a partnership.
List each of these facilities in order of size
from largest to smallest, measured by a
reasonable method (for example, the
number of patients served or total
revenue per facility). For each
non-hospital health care facility, list its
name and address and describe the type
of facility. These types of facilities may
include, but are not limited to,
rehabilitation and other outpatient clinics,
diagnostic centers, long-term acute care
facilities, and skilled nursing facilities.
In the upper left hand corner of the
Part V, Section C table, list the total
number of non-hospital health care
facilities that the organization operated
during the tax year.
If the organization needs additional
space to list all of its non-hospital health
care facilities, it should duplicate Section
C and use as many duplicate copies of
Section C as needed, number each page,
and renumber the line numbers in the left
hand margin (for example, an
organization with 15 such facilities should
renumber lines 1-5 on the 2nd page as
lines 11-15).

Part VI. Supplemental
Information
Use Part VI to provide the narrative
explanations required by the following
questions, and to supplement responses
to other questions on Schedule H (Form
990). Identify the specific part, section,
and line number that the response
supports, in the order in which they
appear on Schedule H (Form 990). Part
VI can be duplicated if more space is
needed.
Line 1. Provide the following
supplemental information:
Part I, line 3c. If applicable, describe
the income-based criteria for determining
eligibility for free or discounted care under
the organization’s financial assistance
policy. Also describe whether the
organization uses an asset test or other
threshold, regardless of income, to
determine eligibility for free or discounted
care.
Part I, line 6a. If the organization’s
community benefit report is in a report
prepared by a related organization, and
not in a separate report prepared by the
organization, identify the related
organization.
Part I, line 7g. If applicable, describe
if the organization included as subsidized
health services any costs attributable to a
physician clinic, and report such costs the
organization included.
Part I, line 7, column (f). If
applicable, enter the bad debt expense
included on Form 990, Part IX, line 25,
column (A), (but subtracted for purposes
of calculating the percentage in this
column.)

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Part I, line 7. Provide an explanation
of the costing methodology used to
calculate the amounts reported in the
table. If a cost accounting system was
used, indicate whether the cost
accounting system addresses all patient
segments (for example, inpatient,
outpatient, emergency room, private
insurance, Medicaid, Medicare,
uninsured, or self pay). Also, indicate if a
cost-to-charge ratio was used for any of
the figures in the table. Describe whether
this cost-to-charge ratio was derived from
Worksheet 2, Ratio of Patient Care
Cost-to-Charges, and, if not, what kind of
cost-to-charge ratio was used and how it
was derived. If some other costing
methodology was used besides a cost
accounting system, cost-to-charge ratio,
or a combination of the two, describe the
method used.
Part II. Describe how the
organization’s community building
activities, as reported in Part II, promote
the health of the community or
communities the organization serves.
Part III, line 4. Describe the
methodology used to determine the
amount in Part III, line 2, including how
the organization accounts for discounts
and payments on patient accounts in
determining bad debt expense.
Describe the methodology used to
determine the amount reported on line 3.
Also describe the rationale, if any, for
including any portion of bad debt as
community benefit.
Also provide, if applicable, the text of
the footnote to the organization’s financial
statements that describes bad debt
expense. If the organization’s financial
statements include a footnote on these
issues that also includes other
information, report only the relevant
portions of the footnote. If the
organization’s financial statements do not
contain such a footnote, enter that the
organization’s financial statements do not
include such a footnote, and explain how
the financial statements account for bad
debt, if at all.
Part III, line 8. Describe the costing
methodology used to determine the
Medicare allowable costs reported in the
organization’s Medicare Cost Report, as
reflected in the amount reported in Part
III, line 6. Describe, if applicable, the
extent to which any shortfall reported in
Part III, line 7, should be treated as a
community benefit, and the rationale for
the organization’s position.
Part III, line 9b. If the organization
has a written debt collection policy and
answered “Yes,” to Part III, line 9b,
describe the collection practices in the
policy that apply to patients who it knows
qualify for financial assistance, whether
the practices apply specifically to such
patients or also cover other types of
patients.
Part V, Section B. Identify the
specific hospital facility name and line
number (from Schedule H (Form 990),

Part V, Section A), to which each set of
responses relates. For instance, if the
organization reported five hospital
facilities in Part V, Section A, it should list
the first facility’s name and number (1) as
a heading, followed by the responses to
applicable Part V, Section B, questions
for that facility, followed by four additional
headings and sets of responses for each
of the other four hospital facilities listed in
Part V, Section A.

• Line 1j: If the organization checked line

1j, describe the other content included in
the hospital facility’s Needs Assessment.
• Line 3: If the organization checked
“Yes,” describe how the hospital facility
took into account input from persons who
represent the community served by the
hospital facility. Include a description of
how the organization consulted with these
persons (whether through meetings,
focus groups, interviews, surveys, written
correspondence, etc.). Identify any
organizations and other groups that the
hospital facility consulted in conducting its
most recent Needs Assessment.
Individual members of community forums,
focus groups, survey groups, and similar
groups do not need to be listed.
• Line 4: If the organization checked
“Yes,” list the other hospital facilities with
which the hospital facility conducted its
Needs Assessment.
• Line 5a: If line 5a is checked, list the
direct website address, or url, where the
Needs Assessment can be accessed.
• Line 5c: If the organization checked line
5c, describe the other means that the
hospital facility used to make its Needs
Assessment widely available.
• Line 6i: If the organization checked line
6i, describe the other ways that the
hospital facility addressed the needs
identified in its most recently conducted
Needs Assessment.
• Line 7: If the organization checked
“No,” to line 7, explain which needs
identified in the hospital facility’s most
recently conducted Needs Assessment
that it did not take action to address, and
why it did not take action to address such
needs.
• Line 9: If the organization checked
“No,” explain what criteria the hospital
facility used to determine eligibility for free
care, or state that the hospital facility did
not provide any free care.
• Line 10: If the organization checked
“No,” explain what criteria the hospital
facility used to determine eligibility for
discounted care, or state that the hospital
facility did not provide any discounted
care.
• Line 11h: If the organization checked
line 11h, describe the other factor(s) that
the hospital facility used in calculating
amounts charged to patients.
• Line 13g: If the organization checked
line 13g, describe other ways that the
hospital facility publicized its financial
assistance policy.
• Line 15e: If the organization checked
line 15e, describe the other similar
actions that the hospital facility was

permitted to take under its policies during
the tax year before making reasonable
efforts to determine the individual’s
eligibility under the facility’s FAP.
• Line 16e: If the organization checked
line 16e, describe the other similar
actions that the hospital facility or an
authorized third party performed during
the tax year before making reasonable
efforts to determine the individual’s
eligibility under the facility’s FAP.
• Line 17e: If the organization checked
line 17e, describe the other efforts that
the hospital facility made or state that the
facility made no such efforts before
initiating any of the actions checked in
line 16 or described in Part VI.
• Line 18d: If the organization checked
line 18d, describe the other reasons why
the hospital facility did not have a written
nondiscriminatory policy for emergency
medical care.
• Line 19d: If the organization checked
line 19d, explain what other means the
hospital facility used to determine the
maximum amounts that can be charged
to FAP-eligible individuals for emergency
or other medically necessary care.
• Line 20: If the organization checked
“Yes” to line 20, explain.
• Line 21: If the organization checked
“Yes,” to line 21, explain the
circumstances in which the hospital
facility charged any FAP-eligible
individual an amount equal to the gross
charge for any service provided to that
individual.
Line 2. Describe whether, and, how the
organization assesses the health care
needs of the community or communities it
serves, in addition to any community
health needs assessment reported in Part
V, Section B.
Line 3. Describe how the organization
informs and educates patients and
persons who are billed for patient care
about their eligibility for assistance under
federal, state, or local government
programs or under the organization’s
financial assistance policy. For example,
enter whether the organization posts its
financial assistance policy, or a summary
thereof, and financial assistance contact
information in admissions areas,
emergency rooms, and other areas of the
organization’s facilities where eligible
patients are likely to be present; provides
a copy of the policy, or a summary
thereof, and financial assistance contact
information to patients as part of the
intake process; provides a copy of the
policy, or a summary thereof, and
financial assistance contact information to
patients with discharge materials;
includes the policy, or a summary thereof,
along with financial assistance contact
information, in patient bills; or discusses
with the patient the availability of various
government benefits, such as Medicaid or
state programs, and assists the patient
with qualification for such programs,
where applicable.
Line 4. Describe the community or
communities the organization serves,

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taking into account the geographic
service area(s) (urban, suburban, rural,
etc.), the demographics of the community
or communities (population, average
income, percentages of community
residents with incomes below the federal
poverty guideline, percentage of the
hospital’s and community’s patients who
are uninsured or Medicaid recipients,
etc.), the number of other hospitals
serving the community or communities,
and whether one or more
federally-designated medically
underserved areas or populations are
present in the community.
Line 5. Provide any other information
important to describing how the
organization’s hospitals or other health
care facilities further its exempt purpose
by promoting the health of the community
or communities, including but not limited
to whether:
• A majority of the organization’s
governing body is comprised of persons
who reside in the organization’s primary
service area who are neither employees
nor independent contractors of the
organization, nor family members
thereof;
• The organization extends medical staff
privileges to all qualified physicians in its
community for some or all of its
departments; and
• How the organization applies surplus
funds to improvements in patient care,
medical education, and research.
Line 6. If the organization is part of an
affiliated health care system, describe the
roles of the organization and its affiliates
in promoting the health of the
communities served by the system. For
purposes of this question, an “affiliated
health care system” is a system that
includes affiliates under common
governance or control, or that cooperate
in providing health care services to their
community or communities.
Line 7. Identify all states with which the
organization files (or a related
organization files on its behalf) a
community benefit report. Report only
those states in which the organization’s
own community benefit report is filed,
either by the organization itself or by a
related organization on the organization’s
behalf.

Worksheet 1. Financial
Assistance at Cost (Part I,
Line 7a)
Worksheet 1 can be used to calculate the
organization’s financial assistance
(sometimes referred to as “charity care”)
at cost reported on Part I, line 7a. Refer to
instructions for Part I for the definition of
financial assistance.
Line 1. Enter the gross patient charges
written off to financial assistance under
the organization’s financial assistance
policies. “Gross patient charges” means
the total charges at the organization’s full

established rates for the provision of
patient care services before deductions
from revenue are applied.
Line 3. Multiply line 1 by line 2, or enter
estimated cost based on the
organization’s cost accounting
methodology. Organizations with a cost
accounting system or a cost accounting
method more accurate than the ratio of
patient care cost to charges from
Worksheet 2 can rely on that method to
estimate financial assistance cost.
Line 4. Enter the Medicaid/provider
taxes, fees, and assessments paid by the
organization, if payments received from
an uncompensated care pool or DSH
program in the organization’s home state
are intended primarily to offset the cost of
financial assistance. If the payments are
primarily intended to offset the cost of
Medicaid services, then report this
amount on Worksheet 3, line 4, column
(A). If the primary purpose of the taxes or
payments has not been made clear by
state regulation or law, then the
organization can allocate the taxes or
payments proportionately between
Worksheet 1, line 4, and Worksheet 3,
line 4, column (A) based on a reasonable
estimate of which portions are intended
for financial assistance and Medicaid,
respectively. “Medicaid provider taxes”
means amounts paid or transferred by the
organization to one or more states as a
mechanism to generate federal Medicaid
DSH funds (the cost of the tax generally
is promised back to organizations either
through an increase in the Medicaid

Worksheet 1.

reimbursement rate or through direct
appropriation).
Line 6. “Revenue from uncompensated
care pools or programs” means payments
received from a state, including Upper
Payment Limit (UPL) funding and
Medicaid DSH funds, as direct offsetting
revenue for financial assistance or to
enhance Medicaid reimbursement rates
for DSH providers. If such payments are
primarily to offset the cost of Medicaid
services, then report this amount on
Worksheet 3, line 7, column (A). If the
primary purpose of the payments has not
been made clear by state regulation or
law, then the organization can allocate
the payments proportionately between
Worksheet 1, line 6, and Worksheet 3,
line 7, column (A) based on a reasonable
estimate of which portions are intended
for financial assistance and Medicaid,
respectively.

Worksheet 2. Ratio of
Patient Care Cost to
Charges
Worksheet 2 can be used to calculate the
organization’s ratio of patient care cost to
charges.
Line 1. Enter the organization’s total
operating expenses (excluding bad debt
expense) from its most recent audited
financial statements.
Line 2. Enter the cost of nonpatient care
activities. “Nonpatient care activities”
include health care operations that
generate “other operating revenue” such

as nonpatient food sales, supplies sold to
nonpatients, and medical records
abstracting. The cost of nonpatient care
activities does not include any total
community benefit expense reported on
Worksheets 1 through 8.
If the organization is unable to
establish the cost associated with
nonpatient care activities, use other
operating revenue from its most recent
audited financial statement as a proxy for
these costs. This proxy assumes no
markup exists for other operating revenue
compared to the cost of nonpatient care
activities. Alternatively, if other operating
revenue provides a markup compared to
the cost of nonpatient care activities, the
organization can assume such a markup
exists when completing line 2.
Line 3. Enter the Medicaid provider
taxes, fees, and assessments paid by the
organization included on line 1, so this
expenditure is not double-counted when
the ratio of patient care cost to charges is
applied.
Line 4. Enter the sum of the total
community benefit expenses reported on
Part I, lines 7e, 7f, 7h, and 7i, column (c),
so these expenses are not
double-counted when the ratio of patient
care cost to charges is applied.
Also include in line 4 the total
community benefit expense reported on
Part I, lines 7a, 7b, 7c, and 7g, column
(c), if the organization has not relied on
the ratio of patient care cost to charges
from this worksheet to determine these
expenses, but rather has relied on a cost

Financial Assistance at Cost (Part I, line 7a)

Keep for Your Records

Gross patient charges
1. Amount of gross patient charges written off under financial assistance policies . . . . . . . . . .

1.

Total community benefit expense
2. Ratio of patient care cost to charges (from Worksheet 2, if used) . . . . . . . . . . . . . . . . . . . .

2.

3. Estimated cost (multiply line 1 by line 2, or obtain from cost accounting) . . . . . . . . . . . . . . .

3.

4. Medicaid provider taxes, fees, and assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5. Total community benefit expense (add lines 3 and 4; enter on Part I, line 7a, column (c))

5.

Direct offsetting revenue
6. Revenue from uncompensated care pools or programs . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Other direct offsetting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

8. Total direct offsetting revenue (add lines 6 and 7; enter on Part I, line 7a, column (d)) . . .

8.

9. Net community benefit expense (subtract line 8 from line 5; enter on Part I, line 7a,
column (e)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

10. Total expense (enter amount from Form 990, Part IX, Line 25, column (A), including the
organization’s share of joint venture expenses, and excluding any bad debt expense
included in Part IX, line 25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

11. Percent of total expense
(divide line 9 by line 10; enter on Part I, line 7a, column (f)) . . . . . . . . . . . . . . . . . . . . . . . .

11.

-11-

%

accounting system or other cost
accounting method to estimate costs of
financial assistance, Medicaid or other
means-tested government programs, or
subsidized health services.
Line 5. Enter the gross expense of
community building activities reported in
Part II of Schedule H (Form 990).
Line 9. Enter the gross patient charges
for any community benefit activities or
programs for which the organization has
not relied on the ratio of patient care cost
to charges from this worksheet to
determine the expenses of such activities
or programs. For example, if the
organization uses a cost accounting
system or another cost accounting
method to estimate total community
benefit expense for Medicaid or any other
means-tested government programs,
enter gross charges for those programs in
line 9.

Worksheet 3.
Unreimbursed Medicaid
and Other Means-Tested
Government Programs
(Part I, lines 7b and 7c)
Worksheet 3 can be used to report the
net cost of Medicaid and other
means-tested government programs. A
“means-tested government program” is a
government program for which eligibility
depends on the recipient’s income or
asset level.
“Medicaid” means the United States
health program for individuals and
families with low incomes and resources.
“Other means-tested government
programs” means government-sponsored
health programs where eligibility for
benefits or coverage is determined by
income or assets. Examples include:
• The State Children’s Health Insurance
Program (SCHIP), a United States
federal government program that gives
funds to states in order to provide health
insurance to families with children; and
• Other federal, state, or local health care
programs.
Report Medicaid and other
means-tested government program
revenues and expenses from all states,
not just from the organization’s home
state.
Line 1, column (A). Enter the gross
patient charges for Medicaid services.
Include gross patient charges for all
Medicaid recipients, including those
enrolled in managed care plans. In certain
states, SCHIP functions as an expansion
of the Medicaid program, and
reimbursements from SCHIP are not
distinguishable from regular Medicaid
reimbursements. Hospitals that cannot
distinguish their SCHIP reimbursements
from their Medicaid reimbursements can
report SCHIP charges, costs, and
offsetting revenue under column (A).

Line 1, column (B). Enter the amount of
gross patient charges for other
means-tested government programs.
Line 3, column (A). Enter the estimated
cost for Medicaid services. Multiply line 1,
column (A) by line 2, column (A), or enter
estimated cost based on the
organization’s cost accounting system or
method. Organizations with a cost
accounting system or a cost accounting
method more accurate than the ratio of
patient care cost to charges from
Worksheet 2 can rely on that system or
method to estimate the cost of Medicaid
services. Organizations relying on a cost
accounting system or method other than
the ratio of patient care cost to charges
from Worksheet 2 should use care not to
double-count community benefit
expenses fully accounted for elsewhere
on Schedule H (Form 990) Part I, line 7,
such as the cost of health professions
education, community health
improvement services, community benefit
operations, subsidized health services,
and research.
Line 3, column (B). Enter the estimated
cost for services provided to patients who
receive health benefits from other
means-tested government programs.
Line 4, column (A). Enter the Medicaid
provider taxes, fees, and assessments
paid by the organization if payments
received from an uncompensated care

Worksheet 2.

pool, UPL program, or Medicaid DSH
program in the organization’s home state
are intended primarily to offset the cost of
Medicaid services. If such payments are
primarily intended to offset the cost of
financial assistance, then report this
amount on Worksheet 1, line 4. If the
primary purpose of such taxes or
payments has not been made clear by
state regulation or law, then the
organization can allocate portions of such
taxes or payments proportionately
between Worksheet 1, line 4, and
Worksheet 3, line 4, column (A), based on
a reasonable estimate of which portions
are intended for financial assistance and
Medicaid, respectively.
Line 6, column (A). Enter the net
patient service revenue for Medicaid
services, including revenue associated
with Medicaid recipients enrolled in
managed care plans. Do not include
Medicaid reimbursement for direct
graduate medical education (GME) costs,
which should be reported on Worksheet
5, line 9. Include Medicaid reimbursement
for indirect GME costs, including the
indirect IME portion of children’s health
GME. The direct portion of children’s
health GME should be reported on
Worksheet 5, line 10. Also include
Medicaid disproportionate share hospital
(DSH) revenue and UPL funding. “Net
patient service revenue” means payments

Ratio of Patient Care Cost to
Charges
(can be used for other
worksheets)

Keep for Your Records

Patient care cost
1. Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

Less adjustments
2. Nonpatient care activities . . . . . . . . . . . . .

2.

3. Medicaid provider taxes, fees, and
assessments . . . . . . . . . . . . . . . . . . . . . .

3.

4. Total community benefit expense . . . . . . .

4.

5. Total community building expense . . . . . . .

5.

6. Total adjustments (add lines 2 through 5) . . . . . . . . . . . . . . .

6.

7. Adjusted patient care cost (subtract line 6 from line 1) . . . . . . .

7.

Patient care charges
8. Gross patient charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

Less: adjustments
9. Gross charges for community benefit programs . . . . . . . . . . .

9.

10. Adjusted patient care charges (subtract line 9 from line 8) . . . .

10.

Calculation of ratio of patient care costs to
charges
11. Ratio of patient care cost to charges (divide line 7 by line 10;
report on the applicable lines of Worksheets 1, 3, or 6) . . . . . .

-12-

11.

%

expected to be received from patients or
third-party payers for patient services
performed during the year. “Net patient
service revenue” also includes revenue
recorded in the organization’s audited
financial statements for services
performed during prior years.
Organizations can enter in Part VI the
amount of prior year Medicaid revenue
included in Part I, line 7b.
Amounts received from the Medicaid
program as “reimbursement for direct
GME” or IME should be treated the way
the Medicaid program in the hospital’s
home state classifies the funds.
Line 7, column (A). Enter revenue
received from uncompensated care pools
or programs if payments received from an
uncompensated care pool, UPL program,
or Medicaid DSH program in the
organization’s home state are intended
primarily to offset the cost of Medicaid

Worksheet 3.

services. If such payments are primarily
intended to offset the cost of charity care,
then report this amount on Worksheet 1,
line 6. If the primary purpose of such
payments has not been made clear by
state regulation or law, then the
organization can allocate the payments
proportionately between Worksheet 1,
line 6, and Worksheet 3, line 7, column
(A), based on a reasonable estimate of
which portions are intended for financial
assistance and Medicaid, respectively.

improvement services and community
benefit operations.

Worksheet 4. Community
Health Improvement
Services and Community
Benefit Operations (Part I,
Line 7e)

“Community benefit operations”
means:
• activities associated with community
health needs assessments
• community planning and
administration, and
• the organization’s activities associated
with fundraising or grant-writing for
community benefit programs.

Worksheet 4 can be used to report the
net cost of community health

“Community health improvement
services” means activities or programs,
subsidized by the health care
organization, carried out or supported for
the express purpose of improving
community health. Such services do not
generate inpatient or outpatient bills,
although there may be a nominal patient
fee or sliding scale fee for these services.

Unreimbursed Medicaid and Other Means-Tested Government
Programs
(Part I, lines 7b and 7c)

Keep for Your Records
(B)
Other means-tested
government
programs

(A)
Medicaid
Gross
patient
charges
1. Gross patient charges from the programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

Total community benefit expense
2. Ratio of patient care cost to charges (from Worksheet 2, if used) . . . . . . . . . . . . . .

2.

3. Cost (multiply line 1 by line 2, or obtain from cost accounting) . . . . . . . . . . . . . . . .

3.

4. Medicaid provider taxes, fees, and assessments . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5. Total community benefit expense Total community benefit expense (add lines 3
and 4; enter amount from column (A) on Part I, line 7b, column (c); and enter amount
from column (B) on Part I, line 7c, column (c)) . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

%

%

%

%

Direct offsetting revenue
6. Net patient service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Payments from uncompensated care pools or programs . . . . . . . . . . . . . . . . . . . .

7.

8. Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

9. Total direct offsetting revenue (add lines 6 through 8; enter amount from column
(A) on Part I, line 7b, column (d) and enter amount from column (B) on Part I, line 7c,
column (d)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

10. Net community benefit expense (subtract line 9 from line 5; enter amount from
column (A) on Part I, line 7b, column (e); enter amount from column (B) on Part I,
line 7c, column (e)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

11. Total expense (enter amount from Form 990, Part IX, line 25, Column (A), including
the organization’s share of joint venture expenses, and excluding any bad debt
expense included in Part IX, line 25, in both columns (A) and (B)) . . . . . . . . . . . . .

11.

12. Percent of total expense (line 10 divided by 11; enter amount from column (A) on
Part I, line 7b, column (f); enter amount from column (B) on Part I, line 7c, column (f))

12.

-13-

Worksheet 4.

Community Health Improvement Services and Community Benefit
Operations (Part I, line 7e)

(A)
Total
community
benefit
expense
1.

1a.

b.

1b.

c.

1c.

d.

1d.

e.

1e.

f.

1f.

g.

1g

h.

1h.

i.

1i.

j.

1j.

2.

Worksheet subtotal (add lines 1a through 1j) . . . . . . . . . . . . . . . .

2.

3.

Community benefit operations
a.

3a.

b.

3b.

c.

3c.

d.

3d.

4.

Worksheet subtotal (add lines 3a through 3d) . . . . . . . . . . . . . . .

4.

5.

Worksheet total (add lines 2 and 4; enter amounts from columns
(A), (B), and (C) on Part I, line 7e, columns (c), (d), and (e),
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

Total expense (enter amount from Form 990, Part IX, Line 25,
column (A), including the organization’s share of joint venture
expenses, and excluding any bad debt expense included in Part IX,
line 25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

Percent of total expense (line 5, column (C) divided by line 6;
enter amount on Part I, line 7e, column (f) . . . . . . . . . . . . . . . . . .

7.

7.

(B)
Direct
offsetting
revenue

(C)
Net community
benefit
expense
(subtract col.
(B) from col. (A)
for lines 1 – 5)

Community health improvement services
a.

6.

Keep for Your Records

Activities or programs cannot be
reported if they are provided primarily for
marketing purposes and the program is
more beneficial to the organization than to
the community. For example, if the
activity or program is designed primarily
to increase referrals of patients with
third-party coverage, required for

licensure or accreditation, or restricted to
individuals affiliated with the organization
(employees and physicians of the
organization).
To be reported, community need for
the activity or program must be
established. Community need can be
demonstrated through the following.

-14-

• A community health needs assessment
developed or accessed by the
organization.
• Documentation that demonstrated
community need or a request from a
public agency or community group was
the basis for initiating or continuing the
activity or program.

• The involvement of unrelated,

collaborative tax-exempt or government
organizations as partners in the activity or
program.
Community benefit activities or
programs also seek to achieve objectives,
including improving access to health
services, enhancing public health,
advancing increased general knowledge,
and relief of a government burden to
improve health. This includes activities or
programs that do the following.

Worksheet 5.

Health Professions Education
(Part I, line 7f)

Keep for Your Records
Totals

Total community benefit expense
1. Medical students . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2. Interns, residents, and fellows . . . . . . . . . . . . . . . . . . .

2.

3. Nurses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4. Other allied health professions, students . . . . . . . . . . .

4.

serve low-income consumers.

5. Continuing health professions education . . . . . . . . . . .

5.

• Reduce geographic, financial, or

6. Other students . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Total community benefit expense (add lines 1 through
6; enter on Part I, line 7f, column (c)) . . . . . . . . . . . . . .

7.

• Are available broadly to the public and
cultural barriers to accessing health
services, and it ceased to exist would
result in access problems (for example,
longer wait times or increased travel
distances).

• Address federal, state, or local public

health priorities such as eliminating
disparities in health care among different
populations.

• Leverage or enhance public health

department activities such as childhood
immunization efforts.

• Otherwise would become the

responsibility of government or another
tax-exempt organization.

• Advance increased general knowledge
through education or research that
benefits the public.

Lines 1a through 1j, column (A). Enter
the name of each reported community
health improvement activity or program
and total community benefit expense for
each. Include both direct costs and
indirect costs in total community benefit
expense. Use additional worksheets if the
organization reports more than 10
community health improvement activities
or programs.
Lines 3a through 3d, column (A).
Enter the name of each reported
community benefit operations activity or
program and total community benefit
expense for each. Include both direct
costs and indirect costs in total
community benefit expense. Use
additional worksheets if the organization
reports more than four community benefit
operations activities or programs.

Direct offsetting revenue
8. Medicare reimbursement for direct GME . . . . . . . . . . .

8.

9. Medicaid reimbursement for direct GME . . . . . . . . . . .

9.

10. Continuing health professions education reimbursement/
tuition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

11. Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.

12. Total direct offsetting revenue (add lines 8 through
11; enter on Part I, line 7f, column (d)) . . . . . . . . . . . . .

12.

13. Net community benefit expense (line 7 minus line 12;
enter on Part I, line 7f, column (e)) . . . . . . . . . . . . . . . .

13.

14. Total expense (enter amount from Form 990, Part IX,
line 25, column (A), including the organization’s share of
joint venture expenses, and excluding any bad debt
expense included in Part IX, line 25) . . . . . . . . . . . . . .

14.

Percent of total expense
15. (line 13 divided by line 14; enter amount on Part I, line
7f, column (f)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.

“Health professions education” means
educational programs that result in a
degree, certificate, or training necessary
to be licensed to practice as a health
professional, as required by state law, or
continuing education necessary to retain
state license or certification by a board in
the individual’s health profession
specialty. It does not include education or
training programs available exclusively to
the organization’s employees and
medical staff or scholarships provided to
those individuals. However, it does

Report total community benefit
expense, direct offsetting revenue, and
net community benefit expense for each
line item.

Worksheet 5. Health
Professions Education
(Part I, Line 7f)
Worksheet 5 can be used to report the
net cost of health professions education.

-15-

%

include education programs if the primary
purpose of such programs is to educate
health professionals in the broader
community. Costs for medical residents
and interns can be included, even if they
are considered “employees” for purposes
of Form W-2, Wage and Tax Statement.
Examples of health professions
education activities or programs that
should and should not be reported are as
follows.

Activity or
Program

Report

Example
Rationale

Scholarships
for community
members

Yes

More benefit
to community
than
organization

Scholarships
for staff
members

No

More benefit
to
organization
than
community

Continuing
medical
education for
community
physicians

Yes

Accessible to
all qualified
physicians

Continuing
medical
education for
own medical
staff

No

Restricted to
own medical
staff members

Nurse
education if
graduates are
free to seek
employment
at any
organization

Yes

More benefit
to community
than
organization

Nurse
education if
graduates are
required to
become the
organization’s
employees

No

Program
designed
primarily to
benefit the
organization

Lines 1 through 6. Include both direct
and indirect costs. Direct costs of health
professions education do not include
costs related to Ph.D. students and
post-doctoral students, which are to be
reported on Worksheet 7, Research. See
the instructions for Part I, line 7, column
(c) for the definition of “indirect costs.”
“Indirect costs” do not include the
estimated cost of “indirect medical
education.”
Direct costs of health professions
education include the following.
• Stipends, fringe benefits of interns,
residents, and fellows in accredited
graduate medical education programs.
• Salaries and fringe benefits of faculty
directly related to intern and resident
education.
• Salaries and fringe benefits of faculty
directly related to teaching:
1. of medical students,
2. students enrolled in nursing
programs that are licensed by state law
or, if licensing is not required, accredited
by the recognized national professional
organization for the particular activity,
3. students enrolled in allied health
professions education programs, licensed
by state law or, if licensing is not required,
accredited by the recognized national
professional organization for the particular
activity, including, but not limited to,
programs in pharmacy, occupational
therapy, dietetics, and pastoral care,

4. and continuing health professions
education open to all qualified individuals
in the community, including payment for
development of online or other
computer-based training accepted as
continuing health professions education
by the relevant professional organization.
• Scholarships provided by the
organization to community members.
Line 8. Enter Medicare reimbursement
for direct GME, reimbursement for
approved nursing and allied health
education activities, and direct GME
reimbursement received for services
provided to Medicare Advantage patients.
For a children’s hospital that receives
children’s GME payments from Health
Resources and Services Administration
(HRSA), count that portion of the payment
equivalent to Medicare direct GME. Do
not include indirect GME reimbursement
provided by Medicare.
Line 9. Enter Medicaid reimbursement
for direct GME, including only that portion
of Medicaid GME payment equivalent to
Medicare direct GME and that can be
explicitly segregated by the organization
from other Medicaid net patient revenue.
Do not include indirect GME
reimbursement provided by Medicaid,
which is to be reported on Worksheet 3,
Unreimbursed Medicaid and Other
Means-Tested Government Programs.
Include Medicaid reimbursement for
nursing and allied health education. If
your state pays Medicaid GME
reimbursement as a lump sum that
includes both direct and indirect
payments, use reasonable methods to
estimate the portion of the lump sum that
is direct (for example, the percent of total
Medicare GME payments that is direct).
Line 10. Enter revenue received for
continuing health professions education
reimbursement or tuition.
Line 11. Enter other revenue received
for health professions education activities
associated with expenses reported in
Worksheet 5, line 7.

Worksheet 6. Subsidized
Health Services (Part I,
Line 7g)
Worksheet 6 can be used to calculate the
net cost of subsidized health services.
Complete Worksheet 6 for each
subsidized health service and report in
Part I the total for all subsidized health
services combined.
“Subsidized health services” means
clinical services provided despite a
financial loss to the organization. The
financial loss is measured after removing
losses, measured by cost, associated
with bad debt, financial assistance,
Medicaid and other means-tested
government programs. Losses
attributable to these items are not
included when determining which clinical
services are subsidized health services
because they are reported as community
benefit elsewhere in Part I or as bad debt

-16-

in Part III. Losses attributable to these
items are also excluded when measuring
the losses generated by the subsidized
health services. In addition, in order to
qualify as a subsidized health service, the
organization must provide the service
because it meets an identified community
need. A service meets an identified
community need if it is reasonable to
conclude that if the organization no longer
offered the service,
• the service would be unavailable in the
community,
• the community’s capacity to provide the
service would be below the community’s
need, or
• the service would become the
responsibility of government or another
tax-exempt organization.
Subsidized health services generally
include qualifying inpatient programs
(neonatal intensive care, addiction
recovery, and inpatient psychiatric units,)
and ambulatory programs (emergency
and trauma services, satellite clinics
designed to serve low-income
communities, and home health
programs). Subsidized health services
generally exclude ancillary services that
support inpatient and ambulatory
programs such as anesthesiology,
radiology, and laboratory departments.
Subsidized health services include
services or care provided by physician
clinics and skilled nursing facilities if such
clinics or facilities satisfy the general
criteria for subsidized health services. An
organization that includes any costs
associated with physician clinics as
subsidized health services in Part I, line
7g, must describe that it has done so and
report in Part VI such costs included in
Part I, line 7g.
Line 3, columns (A) through (D). Enter
the estimated cost for each subsidized
health service. For column (B), enter bad
debt amounts attributable to the
subsidized health service measured by
cost. For column (C), enter amounts
attributable to the subsidized health
service for patients who are recipients of
Medicaid and other means-tested
government programs measured by cost.
For column (D), enter financial assistance
amounts attributable to the subsidized
health service measured by cost. Multiply
line 1 by line 2 or enter estimated cost
based on the organization’s cost
accounting. Organizations with a cost
accounting system or method more
accurate than the ratio of patient care
cost to charges from Worksheet 2 can
rely on that system or method to estimate
the cost of each subsidized health
service.

Worksheet 7. Research
(Part I, Line 7h)
Worksheet 7 can be used to report the
cost of research conducted by the
organization.
Research means any study or
investigation the goal of which is to

Worksheet 6.

Subsidized Health Services (Part I, line 7g)

Keep for Your Records
(A)
Total
subsidized
health
service
program

(C)
(E)
Medicaid
Totals
and other
(subtract
meanscolumns (B),
tested
(D)
(C), and (D)
(B)
government Financial from column
Bad debt
programs assistance
(A))

Program name: ______________________________

Gross patient charges
1.

Gross patient charges from program(s) . . . .

1.

Total community benefit expense
2.

Ratio of patient care cost to charges (from
Worksheet 2, if used) . . . . . . . . . . . . . . . .

2.

3.

Total community benefit expense (multiply
line 1 by line 2, or obtain from cost
accounting; enter column (E) on Part I, line
7g, column (c)) . . . . . . . . . . . . . . . . . . . .

3.

%

%

%

%

Direct offsetting revenue
4.

Net patient service revenue . . . . . . . . . . .

4.

5.

Other revenue . . . . . . . . . . . . . . . . . . . .

5.

6.

Total direct offsetting revenue (add lines 4
and 5; enter column (E) on Part I, line 7g,
column (d)). . . . . . . . . . . . . . . . . . . . . . .

6.

Net community benefit expense (subtract
line 6 from line 3; enter column (E) on Part I,
line 7g, column (e)) . . . . . . . . . . . . . . . . .

7.

Total expense (enter amount from Form 990,
Part IX, line 25, column (A), including the
organization’s share of joint venture
expenses, and excluding any bad debt
expense included in Part IX, line 25) . . . . .

8.

Percent of total expense (line 7, column (E)
divided by line 8; enter on Part I, line 7g,
column (f)) . . . . . . . . . . . . . . . . . . . . . . .

9.

7.

8.

9.

-17-

$

%

generate increase general knowledge
made available to the public (for example:
knowledge about underlying biological
mechanisms of health and disease,
natural processes, or principles affecting
health or illness; evaluation of safety and
efficacy of interventions for disease such
as clinical trials and studies of therapeutic
protocols; laboratory-based studies;
epidemiology, health outcomes, and
effectiveness; behavioral or sociological
studies related to health, delivery of care,
or prevention; studies related to changes
in the health care delivery system; and
communication of findings and
observations, including publication in a
medical journal.) The organization can
include the cost of internally funded
research it conducts, as well as the cost
of research it conducts funded by a
tax-exempt or government entity.
The organization cannot include in
Part I, line 7h, direct or indirect costs of
research funded by an individual or an
organization that is not a tax-exempt or
government entity. However, the
organization can describe in Part VI any
research it conducts that is not funded by
tax-exempt or government entities,
including the cost of such research, the
identity of the funder, how the results of
such research are made available to the
public, if at all, and whether the results
are made available to the public at no
cost or nominal cost.
Examples of costs of research include,
but are not limited to, salaries and
benefits of researchers and staff,
including stipends for research trainees
(Ph.D. candidates or fellows); facilities for
collection and storage of research, data,
and samples; animal facilities; equipment;
supplies; tests conducted for research
rather than patient care; statistical and

Worksheet 7.

computer support; compliance (for
example, accreditation for human
subjects protection, biosafety, HIPAA,
etc.); and dissemination of research
results.
Line 1. Define direct costs under the
guidelines and definitions published by
the National Institutes of Health.
Line 2. Define indirect costs under the
guidelines and definitions published by
the National Institutes of Health.

and the financial value (generally
measured at cost) of donated food,
equipment, and supplies.

Worksheet 8. Cash and
In-Kind Contributions for
Community Benefit (Part I,
Line 7i)

Report cash contributions and grants
made by the organization to entities and
community groups that share the
organization’s goals and mission. Do not
report cash or in-kind contributions
contributed by employees, or emergency
funds provided by the organization to the
organization’s employees; loans,
advances, or contributions to the capital
of another organization; or unrestricted
grants or gifts to another organization that
can, at the discretion of the grantee
organization, be used other than to
provide the type of community benefit
described in the table in Part I, line 7.

Worksheet 8 can be used to report cash
contributions or grants and the cost of
in-kind contributions that support financial
assistance, health professions education,
and other community benefit activities
reportable in Part I, lines 7a through 7h.
Report such contributions on line 7i, and
not on lines 7a through 7h. Do not include
any contributions funded in whole or in
part by a restricted grant, to the extent
that such grant was from a related
organization, as illustrated in the
examples on this page and the next.
“Cash and in-kind contributions”
means contributions made by the
organization to health care organizations
and other community groups restricted to
one or more of the community benefit
activities described in the table in Part I,
line 7 (and the related worksheets and
instructions). “In-kind contributions”
include the cost of staff hours donated by
the organization to the community while
on the organization’s payroll, indirect cost
of space donated to tax-exempt
community groups (such as for meetings),

Example 1. The filing organization
(A) and foundation (B) are related
organizations. B makes a grant to A that
must be used by A to conduct a
community health needs assessment in a
community served by A. A can report the
cost of conducting the community health
needs assessment in Part I, line 7e,
column (c) in the year it conducts the
health needs assessment, but A need not
report the restricted grant from B in Part I,
line 7e, column (d). The same result is
obtained if B is unrelated to A, or if the
grant is unrestricted rather than required

Research (Part I, line 7h)

Special rule for grants to joint
ventures. If the organization makes a
grant to a joint venture in which it has an
ownership interest to be used to
accomplish one of the community benefit
activities reportable in the table, in Part I,
line 7, report the grant on line 7i, but do
not include the organization’s
proportionate share of the amount spent
by the joint venture on such activities in
any other part of the Table, to avoid
double-counting.

Keep for Your Records

Total community benefit expense
1.

Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2.

Indirect costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3.

Total community benefit expense (add lines 1 and 2; enter on Part I, line 7h, column (c)) . . .

3.

Direct offsetting revenue

4.

License fees and royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5.

Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6.

Total Direct offsetting revenue (add lines 4 and 5; enter on Part I, line 7h, column (d)) . . . . .

6.

7.

Net community benefit expense (subtract line 6 from line 3; enter on Part I, line 7h, column
(e)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

8.

Total expense (enter amount from Form 990, Part IX, line 25, column (A), including the
organization’s share of joint venture expenses, and excluding any bad debt expense included
in Part IX, line 25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

Percent of total expense
(divide line 7 by line 8; enter on Part I, line 7h, column (f)) . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

9.

-18-

%

to be used by A to provide community
benefit.
Example 2. Use the same facts as in
Example 1, except A may also use the
grant from B to make a grant to another
organization (C), which must be used by
C to provide community benefit. A makes
such a grant to C. A cannot report the
grant to C in Part I, line 7i, because it is
funded by a related organization, but A
need not report the grant from B in Part I,
line 7, column (d) for any line 7 item. This
is the result regardless of whether B and
C are related organizations.
Example 3. A is a related
organization to B, C, and D. Each of the
organizations files a Form 990 and a
Schedule H (Form 990). A makes a
restricted grant to B that is restricted to
one or more of the community benefit
activities described in the table in Part I,
line 7 (and the related worksheets and
instructions). A’s grant is not funded by a
related organization. B makes a restricted
grant to C that is funded by A’s restricted
grant. C makes an unrestricted grant to D
that is not funded by B’s restricted grant.
Under these circumstances, A can report
the grant to B on A’s Schedule H (Form
990), Part I, line 7i, but neither B nor C
can report their respective grants to C
and D on Part I, line 7i of their own
Schedule H (Form 990). If D uses the
grant funds to make a grant restricted to
one or more of the community benefit
activities described in the Table in Part I,
D can report the grant on line 7i.

Worksheet 8.

Cash and In-Kind Contributions
for Community Benefit
(Part I, line 7i)
Keep for Your Records
(A)
Cash
contributions

1.

2.

3.

4.

5.

Total community benefit
expense (enter amount from
column (C) on Part I, line 7i,
column (c)) . . . . . . . . . . . . . . . . .

1.

Direct offsetting revenue (enter
amount from column (C) on Part I,
line 7i, column (d)) . . . . . . . . . . . .

2.

Net community benefit expense
(subtract line 2 from line 1; enter
on Part I, line 7i, column (e)) . . . . .

3.

Total expense (enter amount from
Form 990, Part IX, line 25, column
(A), including the organization’s
share of joint venture expenses,
and excluding any bad debt
expense included in Part IX, line
25) . . . . . . . . . . . . . . . . . . . . . . .

4.

Percent of total expense (divide
line 3 by line 4; enter on Part I, line
7i, column (f)) . . . . . . . . . . . . . . .

5.

-19-

(B)
In-kind
contributions

(C)
Total

%

Index

B
Bad Debt, Medicare, & Collection
Practices . . . . . . . . . . . . . . . . . . . 5
Worksheet (optional) . . . . . . . . 5
C
Community Building
Activities . . . . . . . . . . . . . . . . . . . . 4
Disregarded entity . . . . . . . . . . . 4
Group return . . . . . . . . . . . . . . . . 4
F
Facility Information:
Community Health Needs
Assessment . . . . . . . . . . . . . . 7
Facility Policies &
Practices . . . . . . . . . . . . . . . . . 7
Billing and Collections . . . . . 8

Charges for Medical
Care . . . . . . . . . . . . . . . . . . . 9
Financial Assistance
Policy . . . . . . . . . . . . . . . . . . 7
Policy Relating to Emergency
Medical Care . . . . . . . . . . . 8
Hospital facilities . . . . . . . . . . . . 6
Other Health Care Facilities
(Non-Hospitals) . . . . . . . . . . . 9
Financial Assistance and Certain
Other Community Benefits at
Cost . . . . . . . . . . . . . . . . . . . . . . . . 2
Contributions for community
benefit . . . . . . . . . . . . . . . . . . . . 3
M
Management Companies and
Joint Ventures . . . . . . . . . . . . . . 6

P
Patient Protection and Affordable
Care Act:
Hospital facilities . . . . . . . . . . . . 1
Section 501(r) of the
Code . . . . . . . . . . . . . . . . . . . . . 1
S
Supplemental Information . . . . . . 9
W
Worksheets:
1-Financial Assistance at
Cost . . . . . . . . . . . . . . . . . . . . . 11
2-Ratio of Patient Care Cost to
Charges . . . . . . . . . . . . . . . . . 11

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3-Unreimbursed Medicaid and
Other Means-Tested
Government
Programs . . . . . . . . . . . . . . . . 12
4-Community Health
Improvement Services and
Community Benefit
Operations . . . . . . . . . . . . . . . 15
5-Health Professions
Education . . . . . . . . . . . . . . . . 16
6-Subsidized Health
Services . . . . . . . . . . . . . . . . . 16
7-Research . . . . . . . . . . . . . . . . 16
8-Cash and In-Kind
Contributions for Community
Benefit . . . . . . . . . . . . . . . . . . 19

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