On December 29 the IRS issued final regulations on Affordable Care Act (“ACA”) provisions for charitable hospitals. Practitioners say the final regulations simplify and reduce the requirements that charitable hospitals must satisfy to retain their tax exempt status under the ACA.
Under the ACA, tax exempt hospitals must conduct a community health needs assessment (“CHNA”) once every three years and devise a strategy to meet the needs identified by the assessment. The final regulations make clear that hospitals may build on prior year CHNAs, although hospitals must still solicit input from members of the community for each new CHNA. Hospitals have wide latitude in defining the communities they intend to serve as long as they do not exclude medically underserved, low-income or minority populations. Additionally, charitable hospitals may collaborate with others hospitals to produce joint CHNA reports.
The ACA also requires charitable hospitals to have a written financial assistance policy (“FAP”) and a written policy on emergency medical care. However, hospitals may still provide financial assistance to an applicant who does not provide all of the information outlined in the FAP as long as the applicant provides some other satisfactory evidence. Hospitals must publicize the FAP within the community they serve.
In many circumstances, a charitable hospital must limit the amount it charges patients eligible for assistance under its FAP to the amount generally billed (“AGB”) to patients with insurance covering such care. The amount a hospital charges a patient equals the amount the patient is personally responsible for paying, after application of deductions and discounts and not including amounts reimbursed by insurers.
The ACA also requires charitable hospitals to make reasonable efforts to determine whether a patient qualifies for financial assistance prior to taking an extraordinary collection action (“ECA”). The final regulations give examples of actions that do and do not constitute extraordinary collection actions. For example, the regulations state that reporting negative information to a credit agency is an ECA but attaching a lien to amounts resulting from a patient’s lawsuit against a third party who caused the patient’s injuries is not an ECA.