Nutrition and the Tax Code

By Hilary Seligman, MD & Marydale Debor, JD

On December 31, 2014, the Internal Revenue Service issued the long-awaited final ruling implementing Section 501 (r) of the Patient Protection and Affordable Care Act of 2010 (ACA). This section of the Internal Revenue Code deals with the conditions hospitals must meet in order to retain their nonprofit health status.  In an exciting development, this new code directs attention to the elimination of “root causes of disease,” especially among medically underserved, minority, and vulnerable populations.

Pre-ACA, hospitals generally “justified” their nonprofit health status by covering the cost of “charity care” for the uninsured.  With the expected dwindling in the numbers of the uninsured, the IRS is now taking tighter control over how hospitals must give back to their communities in order to maintain their nonprofit status.

According to these new rules, non-profit hospitals must now conduct a community health needs assessment to identify “significant health needs” in the community. Examples of these significant health needs include financial barriers to care and community capacity for addressing “the need to prevent illness, ensure adequate nutrition, and address social, behavioral, and environmental factors that influence health in the community”.  Hospitals must then dedicate financial resources to address the needs uncovered in their community health needs assessments.

OK, that is kind of complicated.  But this is big news.  Nonprofit hospitals will now have to treat not only acutely ill patients in own hospital wards, but move out into the community to address the upstream factors that predispose people to disease in the first place, particularly in our most vulnerable neighborhoods.  Most nonprofit hospitals will likely do this by administering grants to organizations that do community work—like Kaiser is doing in their community benefit program.

For those of us working to address food insecurity in the US and to connect the dots between food insecurity and poor health, the inclusion of “adequate nutrition” as a factor essential for community health is an exciting development.  This encourages nonprofit hospitals to support, collaborate, and partner with food banks, farmers markets, and providers of home-delivered meals to bring healthy food access solutions into local neighborhoods.  EatSF is one such program that could benefit from the new IRS rules.  EatSF is a new project under Hilary Seligman’s leadership that provides weekly vouchers ($5-10) redeemable for fruits and vegetables to low-income residents in San Francisco with the ultimate goal of preventing disease by improving dietary intake.  Our first vouchers will be distributed in the next few weeks.  These types of innovative solutions that reduce barriers to healthy behaviors in the community are the best type of prevention.

We are thrilled that hospitals can now get “tax credit” for being a part of these community solutions.  And extend a big “thank you” to the work of the powers-that-be who made this new ruling a reality—including those tireless advocates who filed public comments to the IRS encouraging the “ensur[ing] adequate nutrition” language.  It is about time that lack of access to healthy and affordable foods in underserved neighborhoods became part of our public dialogue about health!

For more information about EatSF, email us at eatsf@ucsf.edu or contact Melissa Akers at melissa.akers@ucsf.edu.

For more information about the ACA ruling, contact Marydale Debor at mdebor@freshadvantage.com.