From humble beginnings as sanctuaries for the poor, nonprofit hospitals have evolved into health systems with complex business relationships and high-paid senior executives. In many communities, the nonprofit hospital is a safe haven for medical care and an economic engine employing thousands and pumping millions of dollars into the local economy.

Yet nonprofit hospitals are under increasing scrutiny for their tax-exempt status. Prompted by soaring pre-recession earnings and top compensation at many nonprofit hospitals, U.S. Sen. Charles Grassley, R-Iowa, is considering legislation to hold nonprofits more accountable for their tax exemptions.

Even without such legislation, this is certain: Nonprofit hospitals will report more to the Internal Revenue Service this year than at any time in the past 30 years because of drastic changes in their annual tax filings. Tax-exempt hospitals file IRS Form 990 to provide information about operations, from salaries of the highest paid employees to business transactions with "interested persons" to physicians' interest in joint ventures to charity care and community benefit.

Although June 30 -- the last day in many health systems' 2008 fiscal year -- is five months away, hospitals need to develop Form 990 communication plans now. As Melinda Hatton, general counsel for the American Hospital Association, told the Post-Gazette in a recent story, completing Form 990 is going to be a "monumental task" that will pull many resources, over a long period, from day-to-day hospital operations.

Transparency is a primary driver for the substantial new disclosures, which must include narrative descriptions of how nonprofit hospitals accomplish their mission and provide community benefit in lieu of paying taxes. The new Form 990 will lift the lid on nonprofit hospitals, giving the IRS and the public a clear view of internal operations. For the first time, the narrative portion of Form 990 is as important as the numbers.

Many experts agree the nation is in recession because sound business practices were scrapped in the pursuit of profit. With daily reminders of what can go awry when profit trumps principle in other industries, advocates for transparency demand that nonprofit hospitals explain how they spend their money as well.

In our work with nonprofit hospitals, the new Form 990 is actually an opportunity to explain the complex issues and relationships that make nonprofit hospitals community assets in today's challenging health care environment. Without such explanation, hospital critics, community health advocates, the news media and others can easily take a hospital's Form 990, available on the Internet, and intentionally or unintentionally misrepresent hospital operations.

Savvy nonprofit hospital leaders should consider how the communities they serve will digest and react to this new disclosure. One hospital executive we work with described the new Form 990 as giving a person 16 ounces of water when all he or she needs is four. The risk of drowning in information that lacks proper context is real and carries huge public consequences.

Couple information overload with the first-time revelation of the relationships hospitals have with physicians, board members and others, and the chances of public misunderstanding and subsequent outcry are substantial. Without a commitment from a hospital to explain its practices proactively, critics may easily (and wrongly) conclude that the institution is operating first and foremost to boost its margins, not to achieve its mission.

Complex business relationships are necessary for hospitals to survive in today's economic climate. A public that sees the nonprofit community hospital as it was originally created -- a charity -- may view these relationships negatively. Any hint of impropriety, even if it's born of miscommunication, is likely to have profound negative consequences. For this reason, nonprofit hospitals must tell their story through effective communications that allow the community to easily understand it.

Our work with executives at one regional health system who took a proactive approach to communicating salary, charity care and other significant financials -- even before the Form 990 changes -- proved that a team of legal, financial and communications experts can help give the community a comprehensive explanation that demonstrates a hospital's commitment to its mission.

Those hospitals that effectively tell their stories will continue to enjoy a solid relationship with their communities, strengthening their nonprofit status. Those hospitals that believe they do not need to do so are operating under a false sense of security.