Oregon has long viewed itself as a leader in health care accountability. When state legislators enacted Oregon’s Community Benefit Reporting framework in 2007, they were responding to a widely held expectation that since nonprofit hospitals receive significant tax advantages as a function of their tax-exempt status, they should provide transparency and assurance that they are meaningfully reinvesting in the health of their communities.
Over time, Oregon’s community benefit requirements have expanded well beyond their original transparency purpose, layering increasing complexity onto a hospital sector facing unprecedented financial pressure. The question is no longer whether the law’s goals or original design were sound, but whether its current structure still makes sense given today’s worsening financial climate for Oregon hospitals.
In short, we believe that it does not. The law contains a complex, individualized “minimum spending floor” mechanism that dictates how much each hospital must spend on community benefit in a given year. Because of the way the law is designed, a hospital that incurs higher levels of charity care expenses and unreimbursed Medicaid shortfalls, gets assigned a higher future spending floor in subsequent years.
This creates a fundamentally counterintuitive result – hospitals with the thinnest margins, often those serving the highest need and lowest income populations, are assigned disproportionally higher spending floor requirements than the institutions that the law was likely intended to impact.
Fortunately, relatively straightforward changes can be made to preserve accountability while reducing administrative burden for both hospitals and the Oregon Health Authority alike – not trivial as we enter into a period of persistent budgetary pressure.
Brief history
Oregon’s Community Benefit Reporting law originated with HB 3290 in 2007, amid a national debate about whether nonprofit hospitals were truly earning their tax‑exempt status. Around the same time, the IRS implemented Schedule H, requiring nonprofit hospitals to report community benefit spending as part of their annual Form 990. Oregon went further by creating a state‑specific reporting framework.
At the time, this was an understandable and measured policy choice and the law was designed to ensure transparency, allow public oversight and reinforce the connection between tax exemption and community reinvestment.
That framework changed fundamentally in 2019 with the passage of HB 3076. The Legislature expanded Oregon’s community benefit program by adding a hospital‑specific minimum spending floor. This made Oregon one of the few states to require a minimum level of community benefit spending, and the only state known to individualize that requirement on a per‑hospital basis through a statutorily defined formula.
The intent of the Legislature and OHA was apparent – hold nonprofit hospitals with strong margins accountable for delivering public value commensurate with their tax benefits and ensure they are meaningfully reinvesting excess margins back into their communities.
Minimum spending floor structure in today’s climate
The problem is not the goal of accountability, but the mechanism Oregon chose to achieve it. The minimum spending floor is largely driven by a hospital’s prior levels of uncompensated care, including charity care and Medicaid shortfalls.
As described above, the higher levels of charity care expense and unreimbursed Medicaid shortfalls a hospital incurs, the higher its future spending floor becomes in subsequent years, creating an undue burden on those hospitals serving the highest‑need and lowest‑income populations.. All at a time when hospitals can least afford making these additional investments.
To help draw a picture of the fundamentally counterintuitive calculation, the pandemic is a prime example. For 2024 through 2027, hospitals community benefit spending will be held accountable to meet uncompensated care delivered during 2020 through 2024, where uncompensated care was at an all time high and have since dropped after the pandemic. Hospital systems like Asante, who stayed open and provide care to the community are penalized in future years.
In practice, the spending floor increasingly penalizes safety‑net hospitals rather than the higher margin institutions it was designed to address. This problem has intensified as Medicaid reimbursement remains far below the cost of care and hospital operating margins across Oregon hover at or below breakeven.
At the same time, upcoming federal changes reducing allowable provider tax rates will further enlarge Medicaid shortfalls, mechanically driving future spending floors higher precisely when hospitals have less financial capacity to meet them.
The original purpose of this law was to keep a balance between tax benefits received by nonprofit hospitals and the amounts that are provided by those nonprofit hospitals back to the communities they serve. In 2024, Oregon hospitals provided $2.2 billion in total community benefit spending, 76.5 percent of which was unreimbursed care spending. Oregon’s hospitals had a total operating margin of 0.3% in 2024.
The financial value of hospital tax exemptions, which most notably are derived from income and property taxes, decline sharply when hospitals are operating with flat or negative margins, like they are in today’s climate.
In short, Oregon nonprofit hospital community benefit and, subsequently, minimum spending floors, are increasing, while the tax benefits and margins are decreasing. The result is a system that is increasingly disconnected from both hospital finances and the original logic of the law.
Preserving accountability while decreasing regulatory burden
Fortunately, there is a fairly straightforward fix. Oregon can achieve transparency and accountability at substantially lower cost by suspending or eliminating the minimum spending floor, while keeping intact the rest of the community benefit reporting framework.
Oregon can retain a robust public reporting infrastructure in place through annual CBR‑1 reporting, public dashboards, Community Health Needs Assessments, implementation strategies and detailed disclosures of community investments. These tools provide meaningful visibility into hospital behavior and allow policymakers, communities and regulators to assess whether hospitals are fulfilling their public obligations.
By contrast, the minimum spending floor process adds significant administrative burden for hospitals and the Oregon Health Authority, including biennial calculations, complex elections, modification proceedings and public comment processes. The bottom line is that the costs of administering this structure now outweigh its policy benefit.
This fix would keep accountability, help hospitals reduce administrative overhead and allow OHA to reallocate resources to more pressing priorities.
