A section of the healthcare reform law, the Affordable Care Act, raises standards for charity care, financial assistance and meeting community needs for non-profit hospitals receiving tax-exemptions. While some of these provisions went into effect immediately, the Internal Revenue Service still needs to issue regulations for this section of the law, says Kevin Morgan, an attorney with the Baudino Law Group in Des Moines, Iowa. The IRS has received public comments and is expected to issue interim regulations within the next few months, he says. Here Mr. Morgan reviews highlights of the new standards and some questions the upcoming regulations will need to answer.
1. Revisions of policies. Organizations must have a written financial assistance policy covering specific points. They usually have such policies but they may have to revise them to conform to the new law. Effective immediately, policies must include such things as eligibility criteria, whether assistance includes free or discounted care, how charges are calculated and how to apply for financial assistance.
2. New limits on charges. Effective immediately, the organization must limit charges for emergency or other "medically necessary" care to no more than the lowest amounts charged to insured patients involving the same care. The aim is to prevent hospitals from inflating how much they lose on providing charity care for such purposes as retaining their tax-exempt status. While other federal laws have definitions of what is medically necessary, the IRS may come up with its own definition, Mr. Morgan says. The IRS will also need to define exactly what the lowest commercial rate would be, he says.
3. New limits on collection practices. Effective immediately, the organization may not carry out "extraordinary collection actions" until it has made "reasonable efforts" to determine whether a patient is eligible for assistance. "Extraordinary collection actions" still need to be defined, but they would probably include lawsuits against patients and liens on their homes, Mr. Morgan says. "Reasonable efforts" may include such actions as notifying the patient in written and oral communications, he says.
4. Required health needs assessments. The organization must conduct a "community health needs assessment" at least once every three years. The assessment, which does not become effective until March 2012, must solicit input from a broad cross-section of the community, including those with special knowledge of public health. Mr. Morgan says conducting such a broad assessment could be onerous for small hospitals. The IRS has been urged to allow hospitals to incorporate assessments by other bodies, such as the public health department, or update a previous report.
5. Required response to assessment. The organization must report how it is addressing needs identified in its community health needs assessment, including a summary of unmet needs and an explanation why they have not been met. Mr. Morgan says the IRS needs to address how separate organizations in the same community would address shared health needs. For example, would the children's hospital alone address a shortage of pediatrics services?
6. Added reporting requirements. The organization must include several new items in their Form 990 reports to the IRS, such as explaining results of the needs assessment and, for the first time, providing audited financial statements that will be open to public disclosure.
Learn more about the Baudino Law Group.
1. Revisions of policies. Organizations must have a written financial assistance policy covering specific points. They usually have such policies but they may have to revise them to conform to the new law. Effective immediately, policies must include such things as eligibility criteria, whether assistance includes free or discounted care, how charges are calculated and how to apply for financial assistance.
2. New limits on charges. Effective immediately, the organization must limit charges for emergency or other "medically necessary" care to no more than the lowest amounts charged to insured patients involving the same care. The aim is to prevent hospitals from inflating how much they lose on providing charity care for such purposes as retaining their tax-exempt status. While other federal laws have definitions of what is medically necessary, the IRS may come up with its own definition, Mr. Morgan says. The IRS will also need to define exactly what the lowest commercial rate would be, he says.
3. New limits on collection practices. Effective immediately, the organization may not carry out "extraordinary collection actions" until it has made "reasonable efforts" to determine whether a patient is eligible for assistance. "Extraordinary collection actions" still need to be defined, but they would probably include lawsuits against patients and liens on their homes, Mr. Morgan says. "Reasonable efforts" may include such actions as notifying the patient in written and oral communications, he says.
4. Required health needs assessments. The organization must conduct a "community health needs assessment" at least once every three years. The assessment, which does not become effective until March 2012, must solicit input from a broad cross-section of the community, including those with special knowledge of public health. Mr. Morgan says conducting such a broad assessment could be onerous for small hospitals. The IRS has been urged to allow hospitals to incorporate assessments by other bodies, such as the public health department, or update a previous report.
5. Required response to assessment. The organization must report how it is addressing needs identified in its community health needs assessment, including a summary of unmet needs and an explanation why they have not been met. Mr. Morgan says the IRS needs to address how separate organizations in the same community would address shared health needs. For example, would the children's hospital alone address a shortage of pediatrics services?
6. Added reporting requirements. The organization must include several new items in their Form 990 reports to the IRS, such as explaining results of the needs assessment and, for the first time, providing audited financial statements that will be open to public disclosure.
Learn more about the Baudino Law Group.