In the complex world of tax-exempt organizations, hospitals play a crucial role in community health. For tax-exempt hospitals under Section 501(c)(3), complying with IRS requirements is essential to maintain their status. One key component is IRS Form 990 Schedule H, which focuses on reporting community benefits, financial assistance, and other activities. This guide breaks down the 2025 instructions for Schedule H (Form 990), helping hospital administrators, tax professionals, and nonprofit leaders understand the requirements. Whether you’re filing for the first time or seeking updates, we’ll cover everything from purpose to detailed parts, using the latest official IRS guidance.
What is IRS Schedule H (Form 990) and Its Purpose?
IRS Schedule H, titled “Hospitals,” is a required attachment to Form 990 for tax-exempt hospital organizations. Its primary purpose is to provide transparency on the activities, policies, and community benefits delivered by hospital facilities and other non-hospital health care facilities operated during the tax year. This includes reporting on financial assistance policies (FAP), community health needs assessments (CHNA), bad debt practices, and more.
Enacted under the Patient Protection and Affordable Care Act (ACA) in 2010, Section 501(r) of the Internal Revenue Code mandates additional requirements for hospitals to qualify for tax exemption. These include establishing a FAP, emergency medical care policies, billing and collection practices, and conducting CHNAs every three years. Schedule H ensures hospitals demonstrate how they meet these standards while promoting community health.
By filing Schedule H, hospitals report quantifiable community benefits like charity care, Medicaid services, health education, and research. This not only aids IRS oversight but also highlights the societal value of tax-exempt status. For the 2025 tax year, the form emphasizes accurate costing methods and proportionate shares from joint ventures.
You can download the official PDF instructions from the IRS website: https://www.irs.gov/pub/irs-pdf/i990sh.pdf.
Who Must File Schedule H?
If your organization answered “Yes” to Form 990, Part IV, line 20a, you must complete and attach Schedule H. Specifically, any hospital organization that operated at least one hospital facility during the tax year is required to file.
A “hospital facility” is defined as a facility required to be licensed, registered, or similarly recognized as a hospital under state law. Multiple buildings under a single state license count as one facility. The filing combines information from:
- Directly operated hospital facilities.
- Facilities run by disregarded entities (where the organization is the sole member).
- Other health care facilities and programs, even if not part of the hospital’s license.
- Joint ventures treated as partnerships, based on the organization’s proportionate share (e.g., ending capital account percentage from Schedule K-1, Form 1065).
- In group returns, facilities operated by group exemption members or their disregarded entities/joint ventures.
Foreign hospitals are excluded from Parts I, II, III, and V but can be described in Part VI. Organizations without a qualifying hospital facility should not file Schedule H, even if they provide health services.
Tip for SEO and compliance: If your hospital is part of a larger network, ensure proportionate shares are accurately calculated to avoid IRS scrutiny.
Key Definitions in Schedule H Instructions
Understanding terminology is vital for accurate reporting. Here are essential definitions from the 2025 instructions:
- Hospital Organization: An entity operating one or more hospital facilities.
- Financial Assistance Policy (FAP): A policy outlining free or discounted care for eligible patients, sometimes called charity care. It excludes bad debt, contractual adjustments, or self-pay discounts.
- Community Health Needs Assessment (CHNA): A required evaluation every three years, incorporating broad community input to identify and prioritize health needs.
- Amounts Generally Billed (AGB): The maximum charges for FAP-eligible individuals, based on rates billed to insured patients.
- Community Benefit: Activities promoting health, such as financial assistance, Medicaid shortfalls, health education, subsidized services, research, and contributions.
- Bad Debt: Uncollectible charges not qualifying as financial assistance.
- Proportionate Share: For joint ventures, the organization’s share based on capital account percentage or reasonable estimates.
- Medically Indigent: Patients whose medical bills exceed a certain percentage of income or assets, making payment impossible.
These terms are bolded in the instructions and align with the Form 990 Glossary.
Breakdown of Schedule H Parts: Step-by-Step Instructions
Schedule H is divided into six parts, each focusing on specific aspects of hospital operations. Use accurate costing methods (e.g., cost accounting systems or cost-to-charge ratios) for all calculations.
Part I: Financial Assistance and Certain Other Community Benefits at Cost
This part reports FAP details and quantifies community benefits. Indicate if your FAP is uniform across facilities or tailored.
- Line 1-6: Detail FAP criteria (e.g., Federal Poverty Guidelines thresholds, asset tests), budgeting, and community benefit reports. Reports must be made publicly available.
- Line 7 Table: Report benefits like financial assistance (7a), Medicaid (7b), community health improvement (7e), education (7f), subsidized services (7g), research (7h), and contributions (7i). Columns include total expense, offsetting revenue, net expense, and percent of total expense. Exclude bad debt; include joint venture shares.
Use Worksheets 1-8 for calculations. Describe methodologies in Part VI.
Part II: Community Building Activities
Report expenses for activities improving community health not covered in Part I, such as housing improvements, economic development, environmental efforts, or workforce training. Explain in Part VI how these promote health.
Part III: Bad Debt, Medicare, & Collection Practices
- Section A (Bad Debt): Report expense, estimate attributable to FAP-eligible patients, and provide financial statement footnotes.
- Section B (Medicare): Calculate surplus/shortfall from Medicare services; justify as community benefit in Part VI.
- Section C (Collections): Disclose debt collection policies, especially for FAP-eligible patients.
Describe rationales and methodologies in Part VI.
Part IV: Management Companies and Joint Ventures
List entities owned 10% or more by officers, directors, trustees, key employees, or physicians. Include names, activities, and ownership percentages.
Part V: Facility Information
- Section A: List all hospital facilities with details like address, license number, and types (e.g., teaching hospital, ER).
- Section B: For each facility, report on CHNA (Lines 3-12c), FAP (13-16), billing/collections (17-20), emergency care (21), and charges (22-24). Ensure compliance with Section 501(r), including publicizing policies and limiting charges to AGB.
- Section C: Provide supplemental descriptions.
- Section D: List non-hospital health care facilities (e.g., clinics).
New or acquired facilities have special rules.
Part VI: Supplemental Information
Use this for explanations referenced elsewhere, such as costing methods, bad debt rationales, or Section 501(r) failures (per Rev. Proc. 2015-21).
Worksheets for Accurate Reporting
The instructions include optional but recommended worksheets to compute Part I, Line 7 values:
| Worksheet | Purpose | Key Elements |
|---|---|---|
| 1 | Financial Assistance at Cost (Line 7a) | Gross charges written off, cost ratios, net expense. |
| 2 | Ratio of Patient Care Cost to Charges | Adjusts for non-patient costs; used in other worksheets. |
| 3 | Medicaid/Means-Tested Programs (Lines 7b-7c) | Charges, costs, revenues, taxes. |
| 4 | Community Health Improvement (Line 7e) | Program lists, expenses (must meet need criteria). |
| 5 | Health Professions Education (Line 7f) | Costs for external programs, offsetting GME/tuition. |
| 6 | Subsidized Health Services (Line 7g) | Per-service losses, excluding certain costs. |
| 7 | Research (Line 7h) | Direct/indirect costs, public knowledge focus. |
| 8 | Contributions (Line 7i) | Cash/in-kind, restricted to benefits. |
Retain documentation; avoid double-counting.
An optional Worksheet A adjusts Medicare costs in Part III.
Recent Changes and Updates for 2025
The 2025 instructions were last updated December 18, 2025, with no major changes noted beyond ongoing ACA requirements. Check IRS.gov/Form990 for future developments, such as post-publication legislation. Final Section 501(r) regulations apply since tax years after December 29, 2015.
Hospitals must attach audited financial statements to Form 990, including consolidated ones if applicable.
Tips for Filing Schedule H and Maintaining Compliance
- Costing Methods: Use reliable systems; describe in Part VI.
- CHNA Compliance: Conduct every three years with diverse input; make reports public.
- FAP Best Practices: Base on FPG; publicize widely, including translations for limited English proficiency.
- Common Pitfalls: Overstating benefits, ignoring joint venture shares, or charging above AGB.
- E-Filing: Use IRS-approved software for accuracy.
- Resources: Consult the full instructions PDF or IRS.gov for forms.
By following these guidelines, tax-exempt hospitals can demonstrate their commitment to community health while securing their status.
Conclusion
Navigating IRS Form 990 Schedule H is key for tax-exempt hospitals to report community benefits effectively. This 2025 guide ensures you’re equipped with the latest instructions, from FAP requirements to CHNA details. For personalized advice, consult a tax professional. Stay compliant and continue serving your community—it’s what tax-exempt status is all about.