Proposed IRS Regulations Would
Include New Compliance Requirements
on Not-for-Profit Hospitals

By Jeff Gorski, PFS Group

The Patient Protection and Affordable Care Act of 2010 added new section 501(r) to the Internal Revenue Code, which includes additional requirements for hospital organizations wishing to receive or maintain their tax-exempt status under section 501(c)(3) of the Code. Specifically, the new law asks charitable hospitals to satisfy four requirements: a community health needs assessment, a financial assistance policy, limitations on charges and limitations on billing and collections practices.

In June, the IRS issued proposed regulations affecting
the following requirements:


A hospital must establish, implement and make accessible a written financial assistance policy. The policy must:

  1. specify eligibility criteria and whether such assistance includes free
    or discounted care;
  2. explain the basis for calculating amounts billed to patients; and
  3. detail how to apply for financial assistance.

If a hospital does not have a separate billing and collection policy, it must:

  1. have a policy that accounts for the actions it may take in the event of non-payment; and
  2. take measures to widely publicize the policy within the community it serves.

A hospital must also have a written policy requiring it to provide, without discrimination, emergency medical care, regardless of an individuals’ eligibility for financial assistance.

A hospital must limit the amount it charges for emergency or other medically necessary care provided to patients eligible for financial assistance to not more than amounts generally billed to individuals with insurance coverage. It must also ensure the charges to such individuals are less than the gross charges of such care.

A hospital cannot take “extraordinary collection actions” (e.g., lawsuits, arrests, liens or similar actions) until it has made “reasonable effort” to determine whether an individual is eligible for financial assistance.

Though many hospitals may already be in compliance with the new requirements, all tax-exempt hospitals should review their existing policies and procedures to ensure they meet the new rules. For those of us in the healthcare finance industry, we must work closely with hospitals to ensure patients continue receiving the medical care they need and understand such policies and their options when it comes to financial assistance and payment.