|Pennsylvania law permits most nonprofit hospitals to choose from among seven alternative community benefit standards in order to qualify as a tax-exempt “institution of purely public charity.” Six of these standards specify a minimum level of community benefits.
Pennsylvania’s Institutions of Purely Public Charity Act requires that in order to be deemed an “institution of purely public charity,” a hospital must do all of the following: advance a charitable purpose, operate free from any private profit motive, donate a substantial portion of its services to benefit the community, “benefit a substantial and indefinite class of persons who are legitimate subjects of charity,” and relieve government of some of its burden. 10 Pa. Stat. §375 (a)-(f).
To fulfill the requirement of §375(d)(1) that a hospital “donate or render gratuitously a substantial portion of its services to benefit the community,” a hospital must satisfy one of seven standards. Six of these seven standards specify a minimum level of community benefits.
- Providing goods or services to all who seek them without regard of their ability to pay if the institution a) has a written policy to this effect, b) has published this in a reasonable manner, and c) provides these uncompensated goods or services equal to at least 75% of net operating income, but not less than 3% of total operating expenses. 10 Pa. Stat. §375(d)(1)(i)(C).
- Providing goods or services that are based upon the recipient’s ability to pay if a) the institution can demonstration implementation of a written policy and fee schedule based on individual or family income, b) at least 20% of the individuals receiving these goods or services pay no fee or a fee which is lower than the cost of the goods or services, c) at least 10% of the individuals receiving the goods or services receive a reduction in fees of at least 10% of the cost of the goods or services provided to them, and d) no individual pays a fee which is greater than or equal to the cost of the goods or services. 10 Pa. Stat. §375(d)(1)(ii)(B)-(D).
- Providing wholly gratuitous goods or services to at least 5% of those receiving similar goods or services from the institution. 10 Pa. Stat. §375(d)(1)(iii).
- Providing financial assistance or uncompensated goods or services to at least 20% of those receiving similar goods or services if at least 10% either paid no fees or paid fees accounting for 90% or less than the cost of the goods or services. 10 Pa. Stat. §375(d)(1)(iv).
- Providing uncompensated goods or services which in the aggregate equal at least 5% of the institution’s cost of providing the goods or services. 10 Pa. Stat. §375(d)(1)(v).
- Providing goods or services at no fee or reduced fees to government agencies or goods or services to individuals eligible for government programs if any one of the following applies:
- The institution receives 75% or more of its gross operating revenue from grants or fee-for-service payments by government agencies and if the aggregate amount of government agency fee-for-service payments does not exceed 95% of the institution’s costs for providing goods or services to the individuals for whom the fee for services payments are made. 10 Pa. Stat. §375(d)(1)(vi).
- This alternative (which does not specify a minimum level of community benefits) does not apply to nonprofit general hospitals.
- Providing fundraising on behalf of (or grants to) an institution of purely public charity. 10 Pa. Stat. §375(d)(1)(vii). (This standard does not specify a minimum level of community benefit.)