The final IRS 501(r) rules added new requirements for publicizing financial assistance policies to patients but also streamlined certain parts of the process.

At the end of 2014, the Internal Revenue Service (IRS) issued final Section 501(r) regulations related to not-for-profit hospitals and health systems financial assistance policies (FAPs), billing and collection practices, and financial assistance eligibility requirements.

Part of the Affordable Care Act, the 501(r) regulations are one set of criteria that hospitals must meet to maintain their not-for-profit status.

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Identifying Policy Elements

The final regulations require that hospitals and health systems establish written FAPs that include the following elements and apply to all emergency and other medically necessary care.

  • Eligibility criteria
  • Descriptions of assistance-free and/or discounted care
  • Explanations of the basis for calculating changes to FAP-eligible patients
  • Methods of applying for assistance
  • Descriptions of whether information was obtained from sources other than applicants and whether and under what circumstances prior FAP-eligibility determinations are used to presumptively determine eligibility
  • Actions that may be taken in the event of nonpayment-this may also be included in a separate billing and collection policy
  • Listings of providers delivering emergency or other medically necessary care in the hospital who are covered under the FAP and those who are not included-other than the hospital itself-a new requirement

If hospitals have outsourced their emergency department (ED) operations and the third parties providing the ED services do not follow the hospitals' FAPs for emergency care, the hospitals may not be considered to be operating EDs under revenue rule 69-545. This longstanding guidance set forth the not-for-profit hospital community benefit standard. Hospitals are advised to carefully consider the implications of such outsourcing decisions.

Incorporating Emergency Medical Care

Hospitals are required to establish written policies that describe how they will provide care-without discrimination- for emergency medical conditions regardless of whether patients are FAP-eligible. Language may be included in FAPs or added to existing policies related to emergency medical care.

Assistance policies must cover all emergency and other medically necessary care. Hospitals are allowed to use a definition of medically necessary care applicable under the laws of the state in which they are licensed, including the Medicaid definition, or the definition that refers to the generally accepted standards of medicine in the community or an examining physician's determination.

Publicizing the FAP and Notifying Patients

Hospitals' FAPs, FAP applications, and plain-language summaries must be widely available on hospital websites, and paper copies must be made available free of charge upon request. Paper copies are not required if patients state that they would prefer to access the information electronically. Paper copies of FAP documents must be provided upon request in public locations in hospitals. At minimum, these locations must be the emergency department (if applicable) and the admission areas. Other requirements for notifying patients include the following:

Displays. Hospitals must notify and inform visitors about FAPs with information displays of noticeable size and, at a minimum, publicly posted in emergency departments (if applicable) and the admission areas.

Websites. The leading practice is to make FAP information accessible within one or two clicks from hospitals' website home pages. Documents, translations, and contact information should be posted clearly.

Accessibility of Hospital Website Financial Assistance Information
Accessibility of Hospital Website Financial Assistance Information

Community outreach. The preamble states that widely publicizing FAPs within communities requires going beyond making FAPs widely available on websites or upon request. Hospitals must notify and inform community members to reach those most likely to require assistance.

For example, hospitals can promote FAPs with agencies that assist community members in applying for food stamps, subsidized housing, or other means-tested programs. Hospitals can also partner with organizations that provide job training for unemployed workers or English as a second language classes to immigrants and refugees.

Admissions and billing statements. Hospitals must offer FAP information as part of the intake or discharge process and with billing statements. Plain-language summaries must be offered to patients as part of the intake or discharge processes.

One major change in the final rule is that hospitals are no longer required to include full plain-language summaries with all billing statements. Instead, they must include conspicuous notices on billing statements to inform patients of FAP availability. The notices must include telephone numbers of hospital offices or departments where information about FAPs and FAP application processes can be obtained and direct websites where FAP documents may be accessed.

Providing Access for Limited English Proficient Patients

The final rule lowered the threshold for making FAP information available to limited English proficient populations. Hospitals must translate FAPs, applications, and plain-language summaries into the primary language spoken by each language group that constitutes the lesser of 5 percent of the patient population or 1,000 individuals. The final regulations allow a hospital to use any reasonable method to determine such populations.

If fewer than 50 people in a language group trigger the 5 percent threshold, materials do not need to be translated, but the groups must be informed of their rights to oral interpretation of written materials, free of cost.

Obtaining Authorization

The final regulations require an authorized body of the hospital to adopt these policies. Hospitals that have not secured approval of policies from their governance boards, or another authorized body, should do so immediately. This is a required step for establishing the policies.

Taking Action

The final regulations apply to not-for-profit hospitals' taxable years beginning after Dec. 29, 2015. For taxable years beginning on or before Dec. 29, 2015, hospitals may rely on reasonable, good-faith interpretations of section 501(r), and they will be deemed to be in accordance with the requirements if they are in compliance with the provisions of the previously proposed 501(r) regulations and/or these final regulations.

To comply immediately, hospitals should have an authorized body adopt the policy and then post their FAPs, applications, and plain-language summaries on their websites. Your federal tax exemption may depend on it.

Related article: Considering Collection Actions Under New IRS Regulations, Revenue Cycle Strategist, April 2015.

Mark Rukavina is principal, Community Health Advisors, LLC, Boston, and a member of HFMA's Massachusetts-Rhode Island Chapter.

Publication Date: Wednesday, July 01, 2015