The IRS indicated that using the lowest commercially negotiated rate or the average of the three lowest commercially negotiated rates will no longer be considered acceptable calculations.
New Proposed Regulations Require Further Adjustment by 501(c)(3) Hospitals
On June 22, the U.S. Treasury Department and the IRS released proposed regulations to guide tax exempt hospitals in how they should develop financial assistance policies and procedures.
The guidance was published in IRS Regulation 130266-11, and addresses the following 501(r) areas:
- Financial assistance policies, which should be made “widely available”
- Emergency care policies
- Dollar amounts that can be charged to patients eligible for financial assistance
- Collection action guidance for individuals who may be eligible for financial assistance
“Since the U.S. Supreme Court’s decision on June 28 upheld the individual mandate and left these requirements intact, it is important for each nonprofit hospital to make sure its policies and procedures comply with the proposed regulations,” says Kurt Bennion, an engagement director with CliftonLarsonAllen.
Financial assistance and emergency care
The proposed regulations significantly change the acceptable calculations of amounts generally billed when determining the charge limit for people who qualify for financial assistance and who receive emergency medical care.
The proposed regulations indicate two acceptable routes, the “look-back” method and “the prospective Medicare” method. However, the IRS indicated that using the lowest commercially negotiated rate or the average of the three lowest commercially negotiated rates will no longer be considered acceptable calculations.
Widely publicize your financial assistance policy (FAP)
The proposed regulations provide four specific criteria that count as widely publicizing a hospital’s financial assistance policy. All four methods must be used to be considered widely available:
- Post information about the FAP on the hospital’s website
- Make information about the FAP available upon request, both by mail and in person
- Notify hospital visitors of the FAP through a prominent public display at the hospital
- Notify the broader community of the FAP through means targeted to reach individuals in need of financial assistance
The proposed regulations say that hospitals must make a reasonable effort to determine whether a person is eligible for financial assistance before initiating extraordinary collection actions against the person. Extraordinary collection actions include all legal or judicial processes and reporting to credit agencies. The sale of an individual’s debt to another party is also considered an extraordinary collection action.
Emergency medical treatment
The proposed regulations provide an additional requirement for a hospital’s written Emergency Medical Treatment and Active Labor Act (AMTALA) policy: neither the hospital’s policy nor its procedures may discourage individuals from using the hospital for emergency medical treatments by requiring payment before providing services and permitting debt collection activities in the emergency department.
“These new proposed regulations are incredibly detailed and go far beyond what was previously issued,” says Bennion. “For example, the financial assistance policy has five official requirements and these proposed regulations add 4 – 5 sub-requirements for each of the five requirements. So it is in a hospital’s best interest to find out what is in the proposed regulations and start working on compliance.”
How we can help
If you are unsure about your hospital’s compliance with 501(r), we can perform an assessment and analyze your policies and procedures to confirm that you fulfill the requirements.
Originally, the IRS issued two notices after the Patient Protection and Affordable Care Act (PPACA) was enacted on March 23, 2010.
- Notice 2010-39 solicited comments on the IRS’s basic requirements regarding the community health needs assessment, financial assistance policy, limitation on charges, and billing and collections.
- Notice 2011-52 solicited comments on the IRS’s detailed requirements regarding community health needs assessments (CHNA) included in 501(r).
Kurt Bennion, Health Care Engagement Director
email@example.com or 612-397-3072