Defining the value of community benefits. Analyzing the kinds of goods society produces clarifies hospitals' charity care contribution.

Community benefits occur when a hospital bears all or part of the relatively unquantifiable costs of promoting, sponsoring, or engaging in religious, educational, scientific, or health-related activities designed to improve community health. By the very nature of their health-related activities, not-for-profit hospitals make extensive and varied contributions to community benefit. When a hospital free clinic inoculates a child for measles, the community as a whole benefits because the inoculation reduces the chance that measles will spread. Not-for-profit hospitals also provide many goods that are "undersupplied" by the for-profit private sector or the public sector, such as research, trauma centers used disproportionately by self-pay patients, and advocacy to rid the community of health hazards. Moreover, a number of factors impose a legal and normative obligation on not-for-profit hospitals to engage in activities that benefit the community. These include Internal Revenue Service rules governing tax exemption, hospitals' fiduciary responsibilities to philanthropic donors, their obligations as "institutional actors" in their communities, and their mission to reach out to the poor and underserved.