Schedule H is required for nonprofits that operate one or more hospital facilities and it addresses certain requirements hospitals need to meet in order to qualify for tax exemption under section 501(C)(3), such as policies related to financial assistance, emergency medical care, bad debt, and collections. If you run multiple hospitals, report their combined results on Schedule H.
Part I is about your financial assistance policy and information about activities geared toward benefitting the community your hospital is in.
For line 1, a financial assistance policy describes if or how you provide financial assistance, likely in the form of free or discounted services to people who meet your criteria for being unable to pay for all or a portion of the cost. Don’t include:
- Bad debt due that you write off due to someone failing to pay, or the cost of providing the related care.
- The difference between the cost of, and revenue received from, care provided under Medicare, Medicaid, and other means-tested government programs.
- Discounts for patients paying promptly
- Contractual adjustments with third-party payors
On line 2, check off how you apply your financial assistance policy. If you only run one hospital, check off “Applied uniformly to all hospitals.”
Answer the questions on line 3 based on the criteria that applied to the largest number of patients during the year you’re reporting on your Form 990. For line 4, “medically indigent” patients are those who you determine are unable to pay all or some of their medical bills, because the bills are above a certain percentage of their household income and/or assets. Patients may be medically indigent even if their income or assets exceed the eligibility requirements you generally use for free or discounted care in your financial assistance policy.
Answer the questions on line 5 based on the amount you budgeted for free or discounted care under your financial assistance policy.
Line 6 asks about a community benefit report. This report would cover your programs or services promoting health in the community(ies) you serve. If yours is included in the report prepared by a related organization, answer yes and identify the related organization in Part VI, line 1.
On line 7, report the cost of the financial assistance and other community benefits you provide. There are worksheets to help you with this table on pages 13-23 of the instructions for Schedule H. You’re not required to use the worksheets, but must use something with the same methodology. Whichever forms you use, you must retain the documentation of how you calculated the numbers you’re reporting here.
- Column (a): the number of your organization’s activities and programs being reported on each line. Each activity and program should only be reported on one line.
- Column (b): the number of patient contacts or encounters. A patient may be reported on multiple rows if you provided the patient with services in multiple categories.
- Column (c): the total gross expense of the activity during the year. This includes both direct and indirect costs.
- Column (d): revenue from the activity that offsets the expense, such as payment or reimbursement for the services you provided, or grants or contributions that are restricted to this activity. Don’t include unrestricted grants or contributions that you use to fund the activity.
- Columns (e) and (f): don’t report negative numbers. If a number is less than zero, then report zero.
Schedule H can be found here, and more detailed instructions for filling it out are provided here. I will cover other parts of Schedule H in later posts. (Part II | Part III | Part IV)