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The Internal Revenue Service (IRS) and the Treasury Department
recently proposed regulations that will affect charitable hospital
organizations. The Patient Protection and Affordable Care Act (ACA)
added §501(r) to the Internal Revenue Code, which imposes
certain requirements for tax-exempt hospitals to obtain and retain
their tax-exempt status. Under this provision, for example,
hospital organizations must conduct a community health needs
assessment at least once every three years and adopt an
implementation program to meet the identified needs.
In addition, hospital organizations must adopt a written
financial assistance policy (FAP) that establishes eligibility
criteria for free or discounted care, including how any unpaid
charges will be collected as well as a written policy relating to
emergency medical care that outlines requirements to provide care
for emergency medical care regardless of eligibility under the FAP.
The Proposed Regulations provide guidance on compliance with
certain of the §501(r) requirements:
Clarification on which entities must meet the §501(r)
requirements in order to obtain or retain tax exemption.
Descriptions of the information that a hospital facility must
include in its FAP and the methods a hospital facility must use to
widely publicize that policy.
Descriptions of what a hospital facility must include in its
emergency medical care policy.
How the hospital facility can determine the maximum amount that
can be charged for emergency or other medically necessary care
provided to individuals who are eligible for assistance under its
FAP, which cannot be "more than the amounts generally billed
to individuals who have insurance covering such care".
Details on what are considered to be "extraordinary
collections actions" and the reasonable efforts a hospital
must take to determine whether a patient is eligible for its FAP
before it can engage in extraordinary collections actions.
If a hospital or hospital system fails to comply with the
requirements of §501(r), its tax-exempt status will be subject
to revocation. In addition, for certain violations, additional
taxes and/or penalties might apply. For example, if a charitable
hospital fails to conduct a timely community health needs
assessment as required by §501(r), it is subject to a penalty
of $50,000 (excise tax). The Proposed Regulations contain a
placeholder for details as to the consequences of failure to comply
with the requirements to adopt and comply with an FAP and an
emergency medical care policy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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