When Hospital 'Community Benefits' Benefit Relatively Few

By: Marcus J. Hopkins, Health Policy Lead Consultant, ADAP Advocacy

The proverbial dead horse highlights how drug purchases under the 340B Drug Pricing Program exceeded $100 billion for the first time in 2025—an increase from 2024 of 22.8%—according to the Health Resources and Services Administration (HRSA), with hospitals accounting for a combined $83,936,162,423 (83.9%) across all hospital types (HRSA, 2026). Today’s fast-paced news cycle dictates a look at the primary vehicle used by 340B hospitals to claim they are using 340B Program revenues to serve patients: “Community Benefits”.

Photo Source: Debt.com

According to a 2025 report released by the American Hospital Association (AHA), a special interest group that bankrolls inside-the-beltway lobbying firms pretending to care about patient access to care, the 1,166 340B hospitals examined by Research Triangle Institute (RTI) International spent $99,473,767,285 on “Total Benefits to the Community” (AHA, 2025).

What’s key here is how RTI and the AHA have defined “Community Benefit.” It truly amounts to nothing more than profit-driven shenanigans.

By their definition, “Community Benefits” include the following:

• Type of Benefit Provided (1,166 individual hospitals)
• Financial assistance, unreimbursed Medicaid, and unreimbursed costs from means-tested government programs
• Other benefits, including health professions education, medical research, cash and in-kind contributions to community groups
• Community-building activities
• Medicare Shortfall
• Bad debt expense

In fairness, now, this definition didn’t arise out of nowhere. It is a direct response to definitions set by the Internal Revenue Service (IRS) for reporting in Schedule H of the federal Form 990. Schedule H is broken into six parts, each of which is reported to the IRS for data collection purposes. Below are brief descriptions of each Part, but only Parts I, II, III, and VI specifically apply to what the IRS considers to be a “community benefit”:

Part I: Quantifying "Community Benefit"

Part I of Schedule H attempts to quantify the community benefit provided by hospitals annually. Expenses that are reportable in Part I include free care, unreimbursed Medicaid, unreimbursed costs from other means-tested government programs, community health improvement services, health professions education, subsidized health services, research, and contributions to other community groups.

ADAP Advocacy's take: The IRS has not suggested a minimum level of expenditures required to justify tax-exempt status.

Part II: Community Building Activities

Part II quantifies the hospital's community building activities. Although the definition of "community building" may not be obvious at first glance, it is generally understood to refer to programs that are intended to have a beneficial impact upon the health of a community but that do not provide medical care. Examples of community building are housing improvements, economic development, community support, environmental improvements, leadership development, coalition building, community health improvement advocacy, and workforce development.

ADAP Advocacy's take: Despite the inclusion of community building metrics on the Schedule H, these numbers are still separate from the reporting of charity care and community benefit expenditures in Part I. The IRS commentary on the Schedule's final draft reflected the view that the link between community building and health remained tenuous and that the reporting tools in Schedule H are intended, in part, to serve as data collection methods for the IRS to discern what links exist.

Part III: Medicare Shortfalls and Bad Debt

Hospitals incur costs when treating all patients, including patients who are covered by Medicare. Medicare, however, may not reimburse a provider for the total cost of services received by a patient. The difference between the Medicare reimbursement rates and the costs incurred by a hospital are called shortfalls. Schedule H includes a dedicated area in which to report Medicare shortfalls.

ADAP Advocacy's take: Despite the addition of Part III, the IRS does not appear to automatically treat Medicare shortfalls as a direct measure of community benefit. Instead, hospitals are asked to "[d]escribe ... the extent to which any shortfall reported [in Part III] should be treated as community benefit." 

Photo Source: Grammarist

Hospitals regularly engage in billing and collection practices to recoup co-pays, deductibles, and other expenses from patients.

ADAP Advocacy's take: Schedule H allows hospitals to report bad debt in Part III alongside Medicare shortfalls, but bad debt expense may not be reported on the charity care and community benefit table in Part I. As with Medicare shortfalls, filing hospitals must explain what portion of bad debt should be considered community benefit. The IRS comments accompanying the Schedule's final draft indicated that it does not intend to treat any portion of bad debt as a de facto community benefit, citing a lack of consensus on bad debt policies among hospitals.

 Part IV: Management Companies and Joint Ventures

Part IV requires disclosure of any joint ventures in which a hospital participates. 

Part V: Facility Information

Part V requests information about the entity's health care facilities, including questions about compliance with the ACA's requirements.

Part VI: Supplemental Information

Part VI of Schedule H provides an area in which to provide narrative information regarding the amount of community benefit provided. The IRS stated that this area could be used to justify why some portion of Medicare shortfall or bad debt reported in other areas of the Schedule should be considered community benefit. In addition, hospitals may provide details about other community benefits they provide that are not easily quantifiable (Liu, 2024).

As far as ADAP Advocacy can see from the Congressional Research Service (CRS), hospitals are defining “Community Benefit” in a way that does not comply with IRS standards. In fact, of the $99,473,767,285 RTI International reported, 9.5% of those expenditures—including community-building activities, Medicare shortfall, and bad debt expenses—would not be considered a “community benefit” by the IRS.

But observers really need to look further into what “Community Benefits” mean for each category.

When ADAP Advocacy examines Form 990s to review “Charity Care” expenditures, specifically Line 7, Section a is of interest (Figure 1):

Figure 1 – An Example of the Financial Assistance at Cost Line Item in Schedule H on the federal Form 990 Tax Return

Photo Source: ProPublica, 2026

This line specifically asks hospitals to report their provision of “Financial Assistance at cost,” or “charity care.”

The IRS specifically defines “charity care” as, “…free or discounted health services provided to persons who meet the organization's eligibility criteria for financial assistance and are unable to pay for all or a portion of the services.” In fact, the IRS further specifies that charity care 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; self-pay or prompt pay discounts; or contractual adjustments with any third-party payors” (Levinson et al., 2022).

This is why, when looking at the very friendly report published by the AHA, the entirety of their “Community Benefits” reporting should be questioned.

Why?

Because on virtually every Form 990 we examined that included full Schedule H reporting, Line 7, Section b (Medicaid), was significantly higher than Section a.

This means that the provision of “Financial Assistance at cost” makes up a vanishingly small percentage of the entirety of Schedule H reporting.

This prompts a vital question: Should the other sections in Line 7 still be considered a “community benefit”?

Absolutely.

But patients need clear information on how those hospitals are using 340B revenues to DIRECTLY benefit patients. Absent that, GoFundMe pages most likely will continue to serve as the "community benefit" standard for most patients straddled with hospital medical debt.

Disclaimer: All funders of the ADAP Advocacy Association are publicly listed on our website. 

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association; rather, they provide a neutral platform for the author to promote open, honest discussion of public health-related issues and updates.

References:

[1] American Hospital Association. (2025, September). 340B Hospital Community Benefit Analysis. Chicago, IL: American Hospital Association: Data & Insights: Guides & Reports. https://www.aha.org/system/files/media/file/2025/10/340b-hospital-community-benefit-analysis.pdf

[2] Health Resources and Services Administration. (2026, July). 2025 340B Covered Entity Purchases. Rockville, MD: United States Department of Health and Human Services: Health Resources and Services Administration: Office of Pharmacy Affairs: 340B Drug Pricing Program: Program Updates. https://www.hrsa.gov/opa/updates/2025-340b-covered-entity-purchases

[3]Levinson, Z., Hulver, S., & Neuman, T. (2022, November 03). Hospital Charity Care: How It Works and Why It Matters. San Francisco, CA: KFF: Topics: Health Costs. https://www.kff.org/health-costs/hospital-charity-care-how-it-works-and-why-it-matters/

[4] Liu, E. C. (2024, April 15). Legal Requirements for Section 501(c)(3) Hospitals. Washington, DC: Congressional Research Service. https://www.congress.gov/crs-product/R48027

[5] ProPublica. (2026). Full text of "Full Filing" for fiscal year ending Nov. 2023. New York, NY: ProPublica: Nonprofit Explorer: California: Oroville Hospital. https://projects.propublica.org/nonprofits/organizations/941634554/202402859349301695/full

Why Is the 340B Drug Pricing Program the Next ‘Too Big to Fail’

Read the full policy paper, “Is the 340B Drug Pricing Program the Next ‘Too Big to Fail’?”

By: Brandon M. Macsata, CEO, ADAP Advocacy

The 340B Drug Pricing Program sounds wonky and complex, and most patients probably hear the program's name and think, “Oh, it doesn’t even apply to me or my care.” It is wonky; after all, it’s named after Section 340B of the Public Health Services Act of 1992. And even the most well-versed policy expert would admit the program is indeed complex. But rather than trying to explain it in words, click here to watch an amazingly straightforward patient education video produced by the Community Access National Network (CANN). The bottom line is this wonky, complex program has EVERYTHING to do with patient care, and it is highly likely it impacts the care of most of the folks who read this blog post. And here’s why the 340B Drug Pricing Program is the next ‘Too Big to Fail.’

Photo Source: ADAP Advocacy

Today, patients living with HIV can successfully access highly effective therapies to manage the disease and achieve undetectable status, thus making a robust 340B Program essential. Unfortunately, that concept has warped into putting providers before patients. Originally designed to help poor patients access affordable healthcare, it has grown into a $66 billion program, largely benefiting healthcare providers. These healthcare providers' CEOs have benefitted abundantly, too, as ADAP Advocacy noted in its 2024 report and its 2025 supplemental report. Ironically, charity care – which is basically “free” healthcare hospitals extend to patients who otherwise cannot afford their care – has declined. So much for helping poor patients, right?

To make matters worse, a few extremely powerful special interest groups and their high-powered inside-the-beltway Washington lobbyists have successfully created a reform denialism narrative. That narrative is a fallacy. The chief antagonist of reforming the program to serve patients better is the American Hospital Association (AHA). Isn’t it ironic that the AHA fights any effort to reform the program that would result in its hospital members having actually pony up charity care for marginalized communities? Sadly, patient advocacy groups see through this smoke and mirrors by the big hospital systems. 

Pharmaceutical manufacturers—who fund the 340B Program via drug rebates—are pushing reforms to NOT “gut” the program but rather ensure their rebates are going to the intended recipients: patients! Industry-backed reforms are all driven by asking for more accountability and transparency on how their rebates are being spent. What could be more “pro-patient” than asking that rebates designed to help patients actually help patients? Novel idea, right?

Photo Source: Live | Viewpoint

The 340B Program’s reform denialists are scared, evidenced by their lobbyists contacting patient advocacy organizations and all but saying they're being duped by industry because they’re not intelligent enough to know what is best for them. Insulting, right?

The reality is that patients, patient advocacy organizations, and industry can and often do share values on public health and the delivery of healthcare services. The 340B Program is one such example. The program keeps exponentially growing, year after year, and yet medical debt is simultaneously exploding. The program is growing but failing to meet the law's legislative intent, which is helping patients. That is why it begs the question: Is the 340B Drug Pricing Program the Next ‘Too Big to Fail’?

Read the full policy paper, “Is the 340B Drug Pricing Program the Next ‘Too Big to Fail’?”

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.

Provider ‘Smash and Grab’ Tactics Fueling Medical Debt, Hurting Patients

By: Ranier Simons, ADAP Blog Guest Contributor

In the United States, healthcare is one universal expense incurred by everyone, regardless of their station in life. Approximately 100 million people in this country, including 41% of adults, have some sort of medical debt.[1] Some people can manage it, but many struggle. As a result of medical debt, people have had to cut spending on food and necessities, deplete savings, delay purchasing a home, work multiple jobs, or even declare bankruptcy.[1]

Photo Source: iStock (purchased)

Most of the medical debt is actually hospital debt, and that debt is owed to large hospitals, not small private practices. In the United States, there are two different types of hospitals: for-profit and nonprofit. There are 5,139 community hospitals, with 1,228 being for-profit, 951 being state and local government-run hospitals, and 2,960 being non-governmental nonprofit health facilities.[2] For-profit hospitals are business-oriented and owned by investors and shareholders; thus, they are focused on making money for their stakeholders. Nonprofit hospitals are not beholden to any shareholders or investors. In theory, their profits are to be reinvested into the hospitals for their operations. Additionally, nonprofit hospitals are tax-exempt and required to provide more community health services and serve patients regardless of whether they can afford care. Unfortunately, some nonprofit hospitals are the worst offenders when it comes to saddling patients with debt.

Nonprofit hospitals do not pay any federal and state income, property, or sales taxes and receive other tax breaks.[2] In 2020, the nation’s nonprofit hospitals received an estimated $28 billion in tax benefits, accounting for 44% of their net income.[3] In return for the tax benefits, the federal government requires nonprofit hospitals to provide community benefits such as charity care. Charity care is providing services to low-income people for free or at significantly reduced rates.[3] The Affordable Care Act (ACA) also mandates that they must maintain a transparent and available financial assistance program and refrain from taking “extraordinary collection actions” against patients eligible for charity care.[4] The reality of some of the largest nonprofit hospitals is a travesty of the concept of charity care.

Photo Source: National Nurses United

Some nonprofit hospitals aggressively pursue patients over their bills. They garnish paychecks and sell patient accounts to collection agencies (debt buyers) that harass and intimidate. Lawsuits are filed against patients for outstanding balances. Some of them are filed against people who qualify for charity care. These lawsuits attach legal fees and late payment interest, multiplying the original outstanding debt amounts. Moreover, some hospitals pursue family members for a patient’s medical debts and even place property liens on patients’ homes. Many do not find out about property liens until a relative has passed. Property liens lower the value of homes and adversely affect the transference of intergenerational wealth.

Federal tax law mandates that nonprofit hospitals spend some of their revenues as community benefit and defines the kind of spending that qualifies but does not stipulate the amount. Charity care is just one of the defined categories of spend. In 2020, nonprofit hospitals had approximately $28 billion in tax exemptions but provided only $16 billion in free or discounted services through charity care.[5] 

U.S. Senator Bernie Sanders, chair of the Senate Committee on Health, Education, Labor & Pensions (HELP), filed a congressional report on nonprofit hospitals and their tax exemptions. The committee examined 16 of the largest nonprofit health systems in the U.S., finding that they spent less than 60% of the estimated value of their tax breaks on charity care.[6] The 16 hospital chains examined took in more than 3$ billion in annual revenue. Twelve of the 16 chains dedicated less than two percent of their total revenue to charity care, with 6 of those 12 having less than 1% of their total revenue dedicated to charity care.[3] Between 2012 and 2019, nonprofit hospitals increased their average operating profit by more than 36% and almost doubled their cash reserves. In the same timeframe, charity care spending dropped from only $6.7 million to $6.4 million.[3] Ironically, in 2021, of the 16 nonprofit hospital chains in the report, the average CEO compensation was $8 million, with a collective total of more than $140 million.[3]

Photo Source: WRAL

Editor's Note: ADAP Advocacy recently called into question 340B Drug Discount Program practices with an examination focused on growing 340B revenues, increasing executive compensation, declining charity care, and the exploding medical debt.

Sen. Sanders feels that Congress should specifically define the level of charity care and financial assistance required of nonprofit hospitals. One suggestion is that tax breaks be limited to the amount of charity care provided. Additionally, Sanders feels that hospital financial assistance programs should have defined standards. For example, some of the hospitals do not transparently explain, advertise, or actively facilitate entering qualified patients into the programs. Instead, some hospital systems, such as Atrium in North Carolina, steer patients towards loans to pay their outstanding bills that sometimes have interest rates as high as 13%.[7]

Hospital groups pushed back against the analyses by Sen. Sanders, but they also tend to oppose any accountability or transparency reforms.. The American Hospital Association states that nonprofit hospitals' community benefit is comprehensive and encompasses more than just charity care. It says that community benefit includes research, medical innovation, absorbing underpayments from Medicaid, health education, and housing assistance.[6,8] That sentiment is misleading and flawed. For example, a good deal of research is funded by taxpayers’ dollars.

Jen Laws, President & CEO of the Community Access National Network (CANN), isn't buying the AHA's argument. According to Laws, financial assistance and community benefit are different line items on the Internal Revenue Service's Form 990 for a reason. In fact, CANN has been quite vocal on the need for reforms to programs designed to help indigent patients, yet are falling short of that intended goal.

According to Laws, community assumption is a "good faith" definition, but loopholes surrounding hospital-related nonprofit status tax rules inevitably can lead to bad faith in this space, or even abuse. He believes the overwhelming body of evidence surrounding the decline in hospital charity care is in direct opposition of the IRS' intention, namely providing a benefit to needy persons, families, and communities.

Laws said, "For example, our government, namely the IRS, hasn't updated 'community benefit' rules in decades and many no longer apply, like having an open Emergency Room. This gets to the core of CANN's position - honesty is not part of that muddy language. And we need to be frank about that lack of honesty."

It is crucial that community benefit standards are revamped with a focus on charity care that directly benefits those in need. In some states, the difference between the amount of funds spent on charity care and the total tax exemptions the nonprofit hospitals receive is greater than the recorded debts listed on patients' credit reports.[3] Change must come so that needy patients' lives are no longer ruined by being sued by hospitals for outstanding balances as low as $500 or less that they can’t afford to pay.

[1] Levey,N. (2022, June 16). 100 Million people in America are saddled with health care debt. Retrieved from https://kffhealthnews.org/news/article/diagnosis-debt-investigation-100-million-americans-hidden-medical-debt/

[2] Modi, J. (2023, March 21). Nonprofit vs. for-profit hospitals: what’s the difference? Retrieved from https://www.buzzrx.com/blog/nonprofit-vs-for-profit-hospitals-whats-the-difference

[3] United States Senate Health, Education, Labor, and Pensions Committee. (2023, October 10). Mahority Staff Report: Major Nonprofit Hospitals Take Advantage of Tax Breaks and Prioritize CEO Pay Over Helping Patients Afford Medical Care. Retrieved from https://www.sanders.senate.gov/wp-content/uploads/Executive-Charity-HELP-Committee-Majority-Staff-Report-Final.pdf

[4] 26 U.S.C 501(r)(4), (6); Internal Revenue Serv, Billing and Collections – Section 501(r)(6) (Jul. 13, 2023), https://www.irs.gov/charities-non-profits/billing-and-collections-section-501r6. 

[5] Miller, A., Hawryluk,M. (2023, July 11). As Nonprofit hospitals reap big tax breaks, states scrutinize their required charity spending. Retrieved from https://kffhealthnews.org/news/article/nonprofit-hospitals-tax-breaks-community-benefit/

[6] Wilkerson,J. (2023, October 10). Bernie Sanders bashes nonprofit hospitals over their tax breaks. Retrieved from https://www.statnews.com/2023/10/10/bernie-sanders-nonprofit-hospitals/

[7] Levey,N. (2023, August 16). North Carolina hospitals have sued thousands of their patients, a new report finds. Retrieved from https://kffhealthnews.org/news/article/north-carolina-hospitals-patient-debt-lawsuits/

[8] American Hospital Association. (2023, October). Tax-exempt hospitals provided nearly $130 billion in total benefits to their communities. Retrieved from https://www.aha.org/system/files/media/file/2023/10/Results-from-2020-Tax-Exempt-Hospitals-Schedule-H-Community-Benefit-Reports.pdf

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.