city hospital building with reflection

The U.S. Treasury released final regulations on December 29, 2014 that provide guidance regarding the requirements for charitable hospital organizations added by the Patient Protection and Affordable Care Act of 2010.

Background (from the regulations):

Section 501(r) was added to the Code by the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)) (the Affordable Care Act), enacted March 23, 2010, and imposes additional requirements on charitable hospital organizations. Section 501(r)(1) provides that a hospital organization described in section 501(r)(2) will not be treated as a tax-exempt organization described in section 501(c)(3) unless the organization meets the requirements of sections 501(r)(3) through 501(r)(6). Section 501(r)(3) requires a hospital organization to conduct a community health needs assessment (CHNA) at least once every three years and to adopt an implementation strategy to meet the community health needs identified through the CHNA. Section 501(r)(4) requires a hospital organization to establish a written financial assistance policy (FAP) and a written policy relating to emergency medical care. Section 501(r)(5) requires a hospital organization to not use gross charges and to limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the organization’s FAP (FAP-eligible individuals) to not more than the amounts generally billed to individuals who have insurance covering such care (AGB). Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is FAP-eligible before engaging in extraordinary collection actions. Section 501(r)(2)(B) requires a hospital organization to meet each of these requirements separately with respect to each hospital facility it operates.

According to a post written by Emily Morris on the Treasury’s site, Treasury Finalizes Patient Protection Regulations for Tax-Exempt Hospitals, the final regulations provide guidance on the statutory requirements that charitable hospitals:

  • Limit charges.  Hospitals may not charge individuals eligible for financial assistance more for emergency or other medically necessary care than the amounts generally billed to patients with insurance (including Medicare, Medicaid, or private commercial insurance).

  • Establish and disclose financial assistance policies.  Each hospital must establish and widely publicize a financial assistance policy that clearly describes to patients the eligibility criteria for obtaining financial assistance and the method for applying for financial assistance.

  • Abide by reasonable billing and collection requirements.  Charitable hospitals are prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until they make reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy.

  • Perform a community health needs assessment.  Each charitable hospital must conduct and publish a community health needs assessment at least once every three years – and disclose on the tax form it files annually the steps it is taking to address the health needs identified in the assessment.

Here are some other articles and resources regarding the new regulations:

The federal government is cracking down on nonprofit hospitals under ObamaCare in an attempt to prevent harsh collection practices and steep charges for the uninsured. – The Hill

The Internal Revenue Service has released new regulations for charitable hospitals to stop harsh collection practices and make financial assistance policies more transparent to patients. – Becker’s Hospital Review

New Requirements for 501(c)(3) Hospitals Under the Affordable Care Act (IRS)