IRS Form 990 (Schedule H) – Hospitals – In the world of nonprofit healthcare, maintaining tax-exempt status under section 501(c)(3) of the Internal Revenue Code requires transparency and accountability. One key tool for this is IRS Form 990 Schedule H, specifically designed for hospitals. This schedule helps tax-exempt hospital organizations report their community benefits, financial assistance policies, and compliance with federal requirements. Whether you’re a hospital administrator, tax professional, or stakeholder interested in nonprofit healthcare, understanding Schedule H is essential for ensuring regulatory compliance and demonstrating community impact.
In this SEO-optimized guide, we’ll break down the purpose of IRS Form 990 Schedule H, who must file it, its various parts, and key reporting requirements. We’ll draw from official IRS guidelines to provide accurate, up-to-date information as of 2025. By the end, you’ll have a clear roadmap for navigating this critical form.
What Is IRS Form 990 Schedule H and Its Purpose?
IRS Form 990 Schedule H, titled “Hospitals,” is an attachment to Form 990, the annual return filed by tax-exempt organizations. Introduced as part of the Affordable Care Act in 2010, it mandates that hospital organizations report on their activities to promote community health and comply with section 501(r) of the Internal Revenue Code. This section imposes specific requirements on tax-exempt hospitals, including conducting community health needs assessments (CHNAs), establishing financial assistance policies (FAPs), and limiting charges and collections practices.
The primary purpose of Schedule H is to promote transparency. It requires hospitals to quantify and describe the community benefits they provide, such as charity care, health education, and research. This reporting helps the IRS evaluate whether hospitals are fulfilling their tax-exempt mission by addressing community needs rather than operating like for-profit entities. Failure to comply with section 501(r) can result in penalties or loss of tax-exempt status, but corrections can be made under procedures like Revenue Procedure 2015-21.
For the latest version of the form, download the PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f990sh.pdf.
Who Must File IRS Form 990 Schedule H?
Schedule H must be completed by any “hospital organization” that operated at least one “hospital facility” during the tax year and answered “Yes” to Form 990, Part IV, question 20a. A hospital organization is a tax-exempt entity under section 501(c)(3) that runs hospital facilities. A hospital facility is defined as a location licensed, registered, or recognized as a hospital under state law, providing inpatient medical or surgical care.
Key filing notes:
- Inclusion of facilities: Report on facilities operated directly, through disregarded entities (where the organization is the sole member), or joint ventures (using a proportionate share based on ownership interest).
- Group returns: Central organizations filing for affiliates in a group exemption must include all relevant facilities.
- Exclusions: Foreign hospitals are not reported in Parts I–V, and information from separate corporations (except group members) is omitted.
- Voluntary filers: Organizations not required to file Form 990 but choosing to do so must complete Schedule H fully if applicable.
If your organization doesn’t operate a hospital facility, you may not need to file this schedule—but always consult the IRS instructions to confirm.
Breaking Down the Parts of IRS Form 990 Schedule H
Schedule H is divided into six parts, each focusing on different aspects of hospital operations and community benefits. Below, we’ll explore each part, including key requirements and tips for completion.
Part I: Financial Assistance and Certain Other Community Benefits at Cost
This part focuses on reporting the costs of financial assistance (charity care) and other community benefits provided by hospital facilities. Hospitals must indicate if they have a written FAP, eligibility criteria (e.g., based on federal poverty guidelines or assets), and whether they prepare an annual community benefit report.
The core of Part I is Line 7, a table summarizing community benefits:
| Benefit Category | Description | Key Reporting Elements |
|---|---|---|
| Financial Assistance at Cost (Line 7a) | Charity care for eligible patients unable to pay. | Total expense, offsetting revenue, net expense, percent of total expense. |
| Means-Tested Government Programs (Lines 7b–7c) | Costs for Medicaid and similar programs. | Persons served (optional), total and net expenses. |
| Community Health Improvement Services (Line 7d) | Programs addressing health needs identified in CHNAs. | Direct and indirect costs, less offsetting revenue. |
| Health Professions Education (Line 7e) | Training for medical students, nurses, etc. | Subsidies not covered by reimbursements like GME. |
| Subsidized Health Services (Line 7f) | Clinical services operated at a loss to meet community needs. | Excludes bad debt or Medicaid shortfalls. |
| Research (Line 7g) | Studies that generate knowledge for public benefit. | Costs offset by grants or royalties. |
| Cash and In-Kind Contributions (Line 7i) | Donations to health organizations or community groups. | Avoid double-counting with other parts. |
Use IRS-provided worksheets (e.g., Worksheet 1 for charity care costs) to calculate figures accurately. Costs can be derived from cost accounting systems or cost-to-charge ratios. Bad debt is not included here—it’s reported in Part III.
Part II: Community Building Activities
Here, hospitals report expenses for activities that improve community health but aren’t direct medical care, such as economic development, environmental improvements, or housing initiatives. These must tie back to community needs, like those in a CHNA. Describe in Part VI how these activities promote health to justify them as community benefits.
Part III: Bad Debt, Medicare, & Collection Practices
This section addresses financial aspects often misunderstood in nonprofit healthcare:
- Section A (Bad Debt): Report total bad debt expense (Line 2), the portion attributable to FAP-eligible patients (Line 3), and methodologies. Include footnotes from audited financial statements (Line 4).
- Section B (Medicare): Detail Medicare revenues and allowable costs (Lines 5–7). Any shortfall can be treated as a community benefit if justified in Part VI.
- Section C (Collections): Describe debt collection policies, especially for FAP-eligible patients (Line 9b).
Use optional Worksheet A for Medicare calculations. Rationales for treating bad debt or Medicare shortfalls as benefits must be explained.
Part IV: Management Companies and Joint Ventures
List any management companies or joint ventures where officers, directors, trustees, key employees, or physicians own 10% or more. Include details on ownership percentages, activities, and services provided. This ensures transparency in potential conflicts of interest.
Part V: Facility Information
The most detailed part, requiring per-facility reporting:
- Section A: List all hospital facilities by size, including names, addresses, websites, and types (e.g., general medical, teaching hospital).
- Section B: For each facility or group, report on CHNAs (conducted every three years with community input), FAPs (eligibility, publicity), billing and collections (no extraordinary actions before reasonable efforts), emergency care policies, and charges (limited to amounts generally billed for insured patients).
- Section C: Provide descriptions for Section B responses.
- Section D: List non-hospital health care facilities like clinics or nursing homes.
Facilities with similar policies can be grouped to simplify reporting.
Part VI: Supplemental Information
This narrative section supplements other parts with explanations, such as costing methodologies, community definitions, and disclosures for section 501(r) failures under Rev. Proc. 2015-21. It’s crucial for providing context and can be duplicated if needed.
How to File IRS Form 990 Schedule H: Tips and Best Practices?
Filing is electronic via the IRS’s Modernized e-File (MeF) system for most organizations. Use the 2025 instructions for tax years beginning in 2025. Gather data from financial statements, CHNA reports, and policies. Common pitfalls include inaccurate cost calculations or omitting joint venture shares—always use the worksheets.
For compliance, review section 501(r) regulations, effective for tax years after December 29, 2015. Consult a tax advisor for complex scenarios.
Why Schedule H Matters for Tax-Exempt Hospitals?
Beyond compliance, Schedule H showcases a hospital’s commitment to community health, which can enhance public trust and support funding efforts. With healthcare costs rising, transparent reporting on charity care and benefits helps justify tax exemptions.
For more details, refer to the official IRS instructions at https://www.irs.gov/instructions/i990sh. Stay updated via IRS.gov/Form990 for any changes.