January 15, 2015

IRS Publishes Final Rule for Tax-Exempt Hospitals

The Internal Revenue Service published in the Dec. 31 Federal Register a final rule implementing requirements for tax-exempt hospitals under Section 501(r) of the Internal Revenue Code, enacted as part of the Affordable Care Act. The rule finalizes requirements for charitable hospital organizations regarding financial assistance and emergency care policies, charges for emergency and medically necessary care provided to individuals eligible for financial assistance, billing and collections activities, and community health needs assessments.

Hospitals may continue to follow the IRS proposed regulations until the first taxable year beginning after Dec. 29, 2015. At that time, tax-exempt hospitals must comply with the final rule.
The detailed requirements for billing during the 120-day notification that were included in the proposed rule have been essentially eliminated. The final rule -

  • Changes the requirements for patient notification about the hospital's financial assistance policy (FAP), including the requirement of offering a paper copy of the summary of the FAP to patients at registration or at discharge and providing information on the availability of financial assistance on billing statements;
  • Requires hospitals to list in their FAP the providers delivering emergency or other medically necessary care in the facility, and to specify those that are covered by the hospital's FAP and those that are not;
    Requires signage about the FAP;
  • Allows hospitals to change the method for calculating the "amount generally billed" (AGB) rather than being locked into a single methodology;
  • Requires translation of FAP documents if a limited English proficient group constitutes the lesser of five percent of the community served or 1,000 individuals;
  • Clarifies that filing a hospital lien does not constitute an extraordinary collection activity (ECA);
  • States that sale of debt is not considered an ECA if certain requirements are met in the contract of sale; and
  • States that deferring or denying care, or requiring a down payment, based on previous unpaid bills constitute ECAs.

The FHA will be offering an education program on the final rule soon. Contact Kathy Reep, vice president of financial services at (407) 841-6230, for more information.