New law requires Colorado’s nonprofit hospitals to explain their “community benefit” in greater detail

BOULDER — Next year, nonprofit hospitals in Colorado will have to report more specific information about how they spend their “community benefit” dollars, following criticism that they weren’t meeting public needs.

In his State of the State address, Gov. Jared Polis said he wanted to see nonprofit hospitals held “accountable” for meeting local needs. On Wednesday, he signed a scaled-down bill mandating that they report their spending to the state in greater detail.

The original HB23-1243 would have set a floor for community benefit spending, among other changes.

The bill was among a number of health care measures the governor signed Wednesday.

“What they are supposed to do with their immense profits, since they don’t pay taxes, is invest that in the community,” Polis said in a brief statement before signing the bill at Out Boulder County, a nonprofit serving the LGBTQ community. “We don’t know if it’s going to the community’s priorities or just the hospital’s priorities.”

The Internal Revenue Service requires nonprofit hospitals to provide community benefit in place of paying taxes, but doesn’t mandate a minimum amount. That could include free and discounted care; the difference between the cost of care and what Medicare or Medicaid pays; medical research; classes to help patients manage their chronic conditions; staff training; and spending to help meet patients’ social needs, like food and housing.

Rep. Judy Amabile, a Boulder Democrat who sponsored the bill, said she and others noticed hospitals’ spending wasn’t addressing priorities in their communities, like a need for more behavioral health care. There was a “massive amount of blowback” from hospitals, but the bill will help increase transparency, she said.

“It’s a step. It’s not the full solution,” she said.

The final bill requires nonprofit hospitals to submit reports about how much they spend on different categories of community benefit, with more detail than in the past. It also mandates that they hold an annual public meeting where they present their community benefit spending from the past year and collect public input on priorities for the next year.

The Colorado Department of Revenue will calculate the value of the taxes hospitals would have paid if they weren’t nonprofits, and the Colorado Department of Health Care Policy and Financing will release a report comparing the spending to the exemptions and communities’ identified priorities.

Independent hospitals that don’t comply despite warnings could be fined up to $5,000 per week, while systems could be fined up to $20,000 weekly for each location in violation.

The Colorado Hospital Association said in a statement that it worked with lawmakers to build on existing transparency requirements. It said hospitals spent more than $1.9 billion on community benefit in 2021. (The state estimated community benefit at about half that level, because it didn’t include the difference between prices and what Medicaid pays.)

“Those hospitals have also led robust community engagement efforts to solicit input on community benefit programs that will serve community needs,” the Colorado Hospital Association statement said.

Polis also signed several other bills related to health care on Wednesday:

• HB23-1218: Requires health facilities to disclose when they don’t offer certain services for “non-medical” reasons. Typically, they do so because of affiliation with a religious group that objects to gender-affirming care, contraception, abortion or medical aid in dying.

• HB23-1201: Prohibits “spread pricing,” where a pharmacy benefit manager or insurance company pays a lower price to a pharmacy for a drug than it ultimately charges the patient or their employer. It also requires the disclosure of other fees and charges. Pharmacy benefit managers determine which drugs are most accessible through insurance and how much patients must pay out-of-pocket.

• SB23-2: Orders the state to seek permission from federal authorities for Medicaid to pay community health workers. The workers do outreach and patient education, and help people to navigate the health system.