CHNA Requirements: Red Tape or Real Opportunity?

Amid the avalanche of change unleashed by the Affordable Care Act, the CHNA requirement for not-for-profit hospitals has often been viewed as a relatively minor or distant concern.

But in 2013, with the elections over and appeals all but exhausted, that concern is no longer minor, and the deadlines are no longer distant. Over the next 18 months, virtually every not-for-profit hospital or health system will need to have a CHNA – plus the associated Implementation Strategy – completed and approved by its board. Failure to comply could cost millions, since the law allows for revocation of tax-exempt status if a hospital fails to satisfy its CHNA requirements.

Deadlines vary based on each hospital’s fiscal year, with some facilities facing a completion date as early as March 2013. Based on our experience, a fully compliant CHNA will take roughly nine months to complete, meaning that many hospitals are now reaching a critical juncture in the process. (For more specifics on the CHNA timeline, please see the note at the conclusion of this paper.)

The extended time frame is driven largely by IRS requirements. A large-scale “data dump” might be relatively simple and quick, but it seems clear that the IRS will not accept a population health survey presented without interpretation, prioritization, and context. Indeed, Form 990 Schedule H clearly shows that the IRS expects to see definite steps being taken to address a handful of key concerns. Among the many criteria used to determine compliance, Schedule H shows a definite bias toward action verbs:

  • Adoption (x2)
  • Participation (x2)
  • Prioritization (x2)
  • Execution

Given this bias toward action, we believe it is imperative for hospitals to manage expectations by creating a CHNA that meshes with the goals, resources and constraints identified in the strategic planning process. Any CHNA developed in a vacuum – and in a hurry – will make it that much more difficult to demonstrate to the IRS that progress is being made on high-priority needs.

If all of this sounds like an expensive, pointless federal mandate, we don’t believe that it has to be so. With a little planning and foresight, it’s possible to meet all CHNA requirements while keeping research costs down and realizing the greatest benefits from the finished product. As you move forward with your CHNA, keep in mind the following suggestions for minimizing input costs, while maximizing the value of your final report.

Minimize the cost of inputs

No doubt about it, there are real costs involved in preparing a CHNA, and cutting too many corners could endanger your tax-exempt status, should the IRS decide your CHNA is non-compliant.

Still, that doesn’t mean you have to start from scratch. Much of the data that you need can be pulled together from existing sources, including proprietary studies that you’ve already paid for. The key is to start early, allowing plenty of time to search existing sources, identify data gaps, and still perform any additional primary research needed to fill in the blanks. Here are three tips for minimizing the upfront costs of a compliant, comprehensive CHNA:

Go public. Yes, you’ll need to do primary research to have a fully compliant CHNA, but surveys, focus groups and so forth should be viewed as the last step in the research process, utilized as needed to fill in the holes left by other, less expensive data sources.

Because community health is such a popular topic in healthcare reform, reams of useful data are available at little or no cost. In our CHNA work, we have found national sources such as the U.S. Census and County Health Rankings & Roadmaps to be particularly useful as a starting point, while public data from state and local agencies add needed depth and granularity. Among all national, state and local sources, we typically reference up to 20 different sources when compiling a CHNA, so the real challenge lies in identifying and contextualizing the most relevant numbers. Remember, the IRS is not looking for a “data dump.” In order to comply with the law, hospitals must apply the data to prioritize a shortlist of community-level health needs.

Put your CON to work. Public data sources can’t provide all of the information required for your CHNA, but that doesn’t mean you need to start from scratch in gathering proprietary data. If you operate in a Certificate of Need state, you’ve already made a considerable investment in collecting and analyzing statistics that justify the levels of service you provide. For every new bed or piece of diagnostic equipment on your wish list, you’ve had to identify trends in utilization, competition, alternatives and so forth.

Now is the time to leverage that investment by viewing each individual CON application as another building block in your CHNA. Before embarking on a new round of primary research, mine your CON binders for relevant, targeted statistics that you might have already compiled. And don’t forget to check with your CON consulting firm early in the process; they might be able to provide additional data that were not included in the final presentation.

Make strategic use of your strategic plan. Good planning is all about taking the pulse of the community, forecasting trends, identifying needs and capitalizing on opportunities – many of the same steps required in the CHNA process. Because strategic planning is a time-consuming, labor-intensive process, it only makes sense to reuse and repurpose your planning data wherever possible.

Yes, you will need to update many of the numbers to fit the CHNA’s narrower – and more public – purpose, but that’s still a simpler matter than reinventing the proverbial wheel. Again, check with your consultant about supporting data that might not have made the final cut in your planning document.

Another upside to mining your strategic plan for CHNA data: It helps to align the two documents right from the start, preventing the sort of “silo” effect that can turn your CHNA into just another meaningless exercise in regulatory compliance.

Maximize the value of outputs

If the sole purpose of your CHNA is to keep the IRS off your back, then every dollar you spend will seem like one dollar too many. You want the finished document to be compliant, certainly – but much more than that, you want the entire process to be useful and helpful and strategic. If you’re going outside for CHNA preparation, make sure your consulting firm plans to deliver a finished product that provides real value, beyond simply “checking the boxes.” Here are four ways to ensure you’re getting the maximum return on your CHNA investment:

Reinforce your not-for-profit mission. For-profit hospitals don’t have to complete a CHNA, so this regulatory “burden” is actually a good way to separate yourself from the competition. In the final report, make sure to emphasize the amount of effort and research that goes into taking the pulse of the community – something that for-profit hospitals can’t readily match.

Enhance your annual report. The interpretive piece of the CHNA requirement looks a lot like the annual report that many not-for-profit hospitals already produce. But annual reports are often viewed as shameless puffery, while a CHNA boasts extensive research – and the implied endorsement of the federal government. Consider merging the two documents to get more traction for less money.

Take an all-hands approach. The IRS already requires public dissemination of your CHNA, but there’s no reason you should stop with the minimum requirement of a website link. Once you recognize the public value of a CHNA, it can become the foundation of your hospital’s marketing, lobbying, media relations and more. Make your document beautiful, readable and compelling, then put a copy in the hands of everyone who matters. At the very least, make sure you provide a copy in every room – much like an in-flight magazine – as a way to connect with your “captive audience” of patients and visitors.

Co-opt your critics. When the IRS requires that hospitals consult with “persons representing the community’s interests,” the natural instinct is to seek out the opinions of known friends and supporters. But a better strategy might be to approach a few outspoken critics, giving them a voice in the CHNA process and specifically addressing their concerns in the finished document. Listing your critics in the acknowledgements section will show that you’re responsive to all segments of the community, and might even be taken as a kind of de facto endorsement by casual readers.

Confused or concerned about CHNA requirements and deadlines? Contact us with the start date of your fiscal year, and we’ll send a customized spreadsheet with five specific interim target dates to ensure you’re on-track for a timely submission.

Daniel Carter is a principal at Ascendient Healthcare Advisors, a healthcare consulting firm with offices in Chapel Hill, N.C., and Washington, D.C. If you have any questions about CHNA requirements or other issues discussed in this article, please contact Daniel at DanielCarter@Ascendient.com.

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