Community Benefit in California: A New Chapter

Brief on Governor Newsom’s Budget Proposal January 2022

boy pretending to speak on a banana like it's a telephoneIn January 2022, California Governor Gavin Newsom released his proposed 2022-2023 budget launching the California budget process for the year. Included in the budget was an administration proposal that:

  1. Requires that non-profit hospitals demonstrate how they are making investments in local health efforts, specifically community-based organizations that address the social determinants of health, and;
  2. Proposes a statutory change to “direct that 25-percent of a non-profit hospital’s community benefit dollars go to these efforts, while giving the Department of Health Care Access and Information enforcement authority over these requirements.”

This brief summarizes the implications of this proposed change, in the context of the history of community benefit funding. It also includes a short overview of relevant community benefit history, as well as issues, challenges and opportunities to be addressed to achieve the desired outcomes of the Governor’s proposal.

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Challenges and Opportunities

Given a rough estimate of qualified spending of approximately $700-800 million, application of this requirement could double current expenditures flowing into communities. But addressing the profound health inequities in California (and across the country) will require renewed commitment from organizations, institutions, and communities across sectors.

Effective implementation of the Governor’s Budget 25% proposal requires attention to the following:

  • Establish an Incentive to Fund and Report Community Building Activities
  • Increase Clarity and Consistency in Reporting of Services and Activities
  • Establish an Inclusive Advisory Structure
  • Strengthen Community Engagement and Coordination Capacity
  • Use Existing Data to Support an Evidence-Informed Focus on Equity
  • Take into Consideration Inequities in the Healthcare Marketplace
  • Imperative to Build Hospital Transformation Capacity
  • Opportunity to Leverage Existing Assets and Build a More Diverse Health Workforce
  • Connect the Dots
  • Build Shared Ownership for Health
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What is community benefit?

Community benefit is a legal term for expenditures made by non-profit hospitals to fulfill their charitable obligations as tax-exempt health care institutions. While there is no financial threshold requirement at the federal level or in the state of California, it is generally expected that the total of non-hospital community benefit expenditures is at least equal to the value of their tax exemption.

For decades, PHI has provided leadership on community benefit policy, regulation and best practices through state, hospital and community partnerships in California and across the country.

Learn more about PHI's work in this area

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