Schedule H (Form 990) – Worksheets

Worksheet 1 can be used to calculate the organization’s financial assistance (sometimes referred to as “charity care”) at cost entered in Part I, line 7a. Refer to instructions for Part I, line 1, for the definition of “financial assistance.”

Line 1. Enter the gross patient charges written off to financial assistance pursuant to 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. An organization that doesn’t use Worksheet 2 to determine a ratio of patient care cost to charges should make any necessary adjustments for patient care charges and community benefit programs to avoid double counting.

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 enter this amount in Worksheet 3, line 4, column (A). If the primary purpose of the taxes or payments hasn’t 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. “Medicaicaid provider taxes” means amounts paid or transferred by the organization to one or more states as a mechanism to generate federal Medicaid DSH funds (portions of the cost of the tax are generally promised back to organizations either through an increase in the Medicaid 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. If such payments are primarily to offset the cost of Medicaid services, then enter this amount in Worksheet 3, line 7, column (A). If the primary purpose of the payments hasn’t 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.

Line 7. Include the amount of any other offsetting revenue, including any restricted grants received by the organization.

Worksheet 1. Financial Assistance at Cost (Part I, Line 7a)

Worksheet 2 can be used to calculate the organization’s ratio of patient care cost to charges. An organization that doesn’t use Worksheet 2 to determine a ratio of patient care cost to charges should make any necessary adjustments for patient care charges and community benefit programs to avoid double counting.

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 doesn’t include any total community benefit expense entered 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 isn’t double-counted when the ratio of patient care cost to charges is applied.

Line 4. Enter the sum of the total community benefit expenses included in “Total operating expense” on line 1 and entered in Part I, lines 7e, 7f, 7h, and 7i, column (c), so these expenses aren’t double-counted when the ratio of patient care cost to charges is applied.

Also, include on line 4 the total community benefit expense entered in Part I, lines 7a, 7b, 7c, and 7g, column (c), if the organization hasn’t relied on the ratio of patient care cost to charges from this worksheet to determine these expenses, but rather has relied on a cost 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 hasn’t 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 on line 9.

Worksheet 2. Ratio of Patient Care Cost to Charges (can be used for other worksheets)

Worksheet 3 can be used to report the cost of Medicaid and other means-tested government health programs. A “means-tested government program” is a government health 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 aren’t distinguishable from regular Medicaid reimbursements. Hospitals that cannot distinguish their SCHIP reimbursements from their Medicaid reimbursements can enter 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 health 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 health programs.

Line 4, column (A). Enter the Medicaid provider taxes, fees, and assessments paid by the organization 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 services. If such payments are primarily intended to offset the cost of financial assistance, then enter this amount in Worksheet 1, line 4. If the primary purpose of such taxes or payments hasn’t 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. Don’t include Medicaid reimbursement for direct graduate medical education (GME) costs, which should be entered 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 entered on Worksheet 5, line 10. Also, include Medicaid DSH revenue and UPL funding. “Net patient service revenue” means payments expected to be received from patients or third-party payers for patient services performed during the year. “Net patient service revenue” also includes revenue for services performed during prior years.

Organizations can describe in Part VI the amount of prior year Medicaid revenue included in Part I, line 7b.

Amounts received from a Medicaid program as “reimbursement for direct GME” or IME should be treated the way the Medicaid program that provides reimbursement 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 services. If such payments are primarily intended to offset the cost of charity care, then enter this amount on Worksheet 1, line 6. If the primary purpose of such payments hasn’t 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 3. Medicaid and Other Means-Tested Government Health Programs

Worksheet 4 can be used to report the net cost of community health improvement services and community benefit operations.

“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 don’t generate inpatient or outpatient revenue, although there may be a nominal patient fee or sliding scale fee for these services.

“Community benefit operations” means:

• Activities associated with conducting community health needs assessments,
• Community benefit program administration, and
• The organization’s activities associated with fundraising or grant writing for community benefit programs.

Activities or programs cannot be reported if they are provided primarily for marketing purposes or if they are more beneficial to the organization than to the community. For example, the activity or program may not be reported if it is: designed primarily to increase referrals of patients with third-party coverage; required for license or accreditation, except when responding to a community health need, enhancing public health, or relieving the burden of government to improve health; 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.

• A CHNA conducted or accessed by the organization.
• Documentation that demonstrated community need or a request from a public health 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 carried out for the express purpose of improving community health.

Community benefit activities or programs also seek to achieve a community benefit objective, 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.

• Are available broadly to the public and serve low-income consumers.
• Reduce geographic, financial, or cultural barriers to accessing health services, and if they ceased 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 access to health care services or disparities in health status among different populations.
• Leverage or enhance public health department activities such as childhood immunization efforts.
• Strengthen community health resilience by improving the ability of a community to withstand and recover from public health emergencies.
• 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 enters more than four community benefit operations activities or programs.

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

Worksheet 4. Community Health Improvement Services and Community Benefit Operations

Worksheet 5. Health Professions Education (Part I, Line 7f)

Worksheet 5 can be used to report the net cost of health professions education.

“Health professions education” means educational programs that result in a degree, a 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 doesn’t include education or training programs available exclusively to the organization’s employees and medical staff or scholarships provided to those individuals. However, it does 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 shouldn’t be reported are as follows.

Lines 1 through 6. Include both direct and indirect costs. Direct costs of health professions education don’t include costs related to Ph.D. students and post-doctoral students, which are to be entered on Worksheet 7, Research. See the instructions for Part I, line 7, column (c), for the definition of “indirect costs.” “Indirect costs” don’t 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. Medical students;
  2. Students enrolled in nursing programs that are licensed by state law or, if licensing isn’t 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 isn’t 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; and
  4. 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. Don’t include indirect GME reimbursement provided by Medicare or Medicaid.

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. Don’t include indirect GME reimbursement provided by Medicaid, which is to be entered in 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 entered on Worksheet 5, line 7.

Total community benefit expense

Direct offsetting revenue

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 enter 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 associated with bad debt, financial assistance, Medicaid, and other means-tested government programs. Losses attributable to these items aren’t 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 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 can include qualifying inpatient programs (for example, neonatal intensive care, addiction recovery, and inpatient psychiatric units) and outpatient 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 at 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 stand-alone physician clinics (not other facilities at which physicians provide services) as subsidized health services in Part I, line 7g, must describe that it has done so and enter on Part VI such costs included in Part I, line 7g.

Note. The organization can report a physician clinic as a subsidized health service only if the organization operated the clinic and associated hospital services at a financial loss to the organization during the year.

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 health programs. For column (D), enter financial assistance amounts attributable to the subsidized health service measured by cost. Multiply line 1 by line 2 or enter the estimated expense of each subsidized health service 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.