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The public finds it increasingly difficult to distinguish voluntary, not-for-profit health care organizations from their for-profit competitors. One result of this trend is challenges to not-for-profits' tax-exempt status. In 1987, this article's author, with Bruce Vladeck, published a book called Mission Matters: A Report on the Future of Voluntary Health Care Institutions. That book warned not-for-profit hospitals that, if they were to survive, they must maintain a close relationship with their communities. They urged such hospitals to nurture five traditional characteristics: Values that reflect community commitment. Accountability to patients and communities. Long-term commitment in the face of short-term trends and opportunities. A physician-hospital relationship that fosters a symbiosis of service. Institutional voluntarism that allows institutions to be both provider and beneficiary of community service. In this article, the author seeks to remind leaders of voluntary, not-for-profit institutions, including Catholic institutions, that they neglect community service at their own peril.

Health care reform has again focused the issues of ownership and mission of organizations in the health care field. Some believe that universal entitlement will eventually make both charitable patient care and the nonprofit form of organization obsolete. Others believe that special treatment of nonprofit organizations does not depend on charity at all; rather that the nonprofit form has social value in and of itself. The authors reflect a different point of view. They suggest that with reform, community benefit as the modern expression of a charitable mission will become ever more important in achieving the nation's health care goals. They believe that nonprofit organizations will continue to be entitled to special treatment only if their missions and programs extend beyond care of patients and entitled populations to focus also on care of communities. Any health organization's investment in disciplined community initiatives encompasses all the people in targeted communities, including those served by competing organizations. Without tax exemption, an organization committed to community care initiatives will be at a competitive disadvantage under the proposed community rated capitation payment system. Rather than abandoning the community benefit standard for tax exemption, health care reform calls for more systematic management of community care initiatives by nonprofit organizations and also of tax-exemption eligibility by the IRS.

Voluntary, not-for-profit hospitals are in danger of losing their tax-exempt status as policymakers lean toward stricter charity care requirements that would penalize hospitals which failed to provide at least a predetermined level of charity care. Proposed legislation abandons community benefit and advocates a relief-of-poverty standard. The relief-of-poverty standard advances the notion that hospitals are not providing enough charity care to merit their tax exemption. However, the voluntary hospitals' share of uncompensated care costs (as a percentage of total costs) increased from 70 percent in 1981 to 75 percent in 1989. The relief-of-poverty standard is inferior to the community benefit standard because it does not take into account that the character of community benefit varies among hospitals and communities. However, community benefit must be better defined. Some current activities--individual hospital reassessments, collective hospital reassessments, voluntary development of criteria, and statutory standards--will be instructive in efforts to arrive at a definition of community benefit that is appropriate for the specific community. Leaders in voluntary, not-for-profit hospitals need to develop positive and equitable criteria for hospital tax exemption. These hospitals' accountability is in question, but it is their integrity that is at stake.