Health Law Blog - Healthcare Legal Issues

IRS Proposed Regulations Defining Section 501(r) Responsibilities

In the week before the Supreme Court decided the landmark case upholding the Affordable Care Act, the Treasury Department issued proposed regulations providing regulatory detail on the aspects of new Code Section 501(r) that regulates a non‑profit hospital’s financial assistance programs.  We have previously covered the requirement that a 501(c)(3) organization conduct a Community Health Needs Assessment (CHNA) but have not previously covered some of the other requirements of Section 501(r).

 The Supreme Court’s recent affirmation of the Affordable Care Act means that the requirements of Section 501(r), including the financial assistance portions of that provision, will go forward as planned.

 The Treasury Department’s new proposed regulations provide guidance on the requirements for complying with Code Sections 501(r)(4)-(6) which require hospitals to establish financial assistance policies, limit certain charges to financial assistance eligible individuals, and regulates billing and collection methods.

 Financial Assistance Policy

 Section 501(r)(4) requires a hospital organization to establish a written financial assistance policy (“FAP”) and a written policy relating to emergency medical care.  Both policies are required to include specific information. 

 The proposed regulation further identifies the information that a hospital facility is required to include in its FAP and the methods a hospital facility must use to publicize its FAP.  What a hospital facility must include in its emergency medical care policy is also clarified.

 Limitation on Charges to FAP-eligible Persons

 Section 501(r)(5) requires a hospital organization to limit amounts charged for medically necessary care provided to FAP-eligible persons to not more than the amount that would be billed to individuals who have insurance covering such care (“AGB”).  

 What does AGB Stand for?

 The proposed regulation describes how a hospital facility determines the AGB it can charge a FAP-eligible individual for medically necessary care.  A hospital facility will not fail to satisfy this requirement if it charges an individual more than AGB, as long the hospital facility is complying with all requirements regarding notifying individuals about the FAP, responding to submitted applications, and correcting the amount charged if the individual is later found to be FAP-eligible.

 Extraordinary Collection Efforts

 Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is FAP-eligible before engaging in extraordinary collection actions against the person.

 The proposed regulation clarifies what actions are “extraordinary collections actions” and the “reasonable efforts” that a hospital facility must make to determine FAP-eligibility before engaging in such actions.

 What Entities Does Section 501(r) Apply To?

 Finally, the proposed regulations also provide guidance on which entities are required to meet the requirements of the above-mentioned sections.  Specifically, a definitions section defines “hospital organization,” “hospital facility,” and other key terms used in the regulation.

 Hospital facilities are encouraged to review their policies regarding FAP and consider how these proposed regulations may impose new requirements for maintaining their tax-exempt status.  In addition, the Department of Treasury invites comments and requests for a public hearing until September 24, 2012.

 For further information, please contact Mary Ellen Schill, John H. Fisher, CHC or your regular Ruder Ware attorney contact.

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John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
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