Ways and Means Eyes Tax-Exempt Hospitals

PPACA Section 9007(b) created IRC Section 501(r), which requires that 501(c)(3) hospital:

• Go through an IRS community benefit activity review at least once every 3 years.
• Include more information on Form 990 filings.
• Prepare and publicize a “community health needs assessment” (CHNA) every 3 years; 
• Adopt and publicize a financial assistance policy.
• Limit charges for medical care for patients who need medical assistance.
• Refrain from engaging in “extraordinary” collection efforts before making  reasonable attempts to determine whether a patient qualifies for financial  assistance.

Most of the requirements took effect Jan. 1, 2011, and the CHNA requirement will start to apply in the taxable year starting Jan. 1, 2013, Regier said.

Since Section 501(r) was enacted in 2010, the IRS has issued guidance in an announcement and three notices, but it has not issued any formal regulations, Regier said.

The IRS also seems to have gotten around the usual rules that government IRS rulemaking, by adding 20 questions with about 60 subparts to the IRS Form 990 Schedule H that hospitals must fill out, Regier said.

The IRS has said in response to hospitals’ complaints that some of the questions are designed simply to collect information, not for use in enforcement proceedings, Regier said.

VHA is working with other health care group to try to make Schedule H less burdensome, Regier said.

The CHNA requirements, for example, are too detailed, and they require that a hospital provide, for example, the specific names and titles of individuals consulted, and whether consultations involved meetings, focus groups, interviews, surveys or written correspondence, Regier said.

Regier said hospitals also need guidance on matters such as how they should go about calculating permissible charges in compliance with PPACA limits on the amounts hospitals can charge for emergency or other medically necessary treatment provided for patients who qualify for financial assistance, Regier said.

“Did Congress intend this requirement to apply and be calculated on a procedure-by-procedure basis or may hospitals calculate an average effective discount rate received from each commercial insurance company across all covered procedures and services?” Regier asked.

Hospitals also need to know whether they can report delinquent patient accounts to credit agencies and what constitutes a “reasonable effort” to determine whether an individual is eligible for financial assistance, Regier said.