Treasury Issues Proposed Charitable Hospital Regulations

By Bruce R. Hopkins, EditorJuly 22, 2012 | Print

(Originally published in the July 2012 issue of Bruce R. Hopkins Nonprofit Counsel, available electronically to subscribers on publication.)

he Department of the Treasury, on June 22, issued proposed regulations providing guidance regarding the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for certain care provided to individuals eligible for financial assistance, and billing and collections (REG-130266-11). The regulations, of course, reflect changes in the federal tax law wrought by the Patient Protection and Affordance Care Act (IRC § 501(r)(4)–(6)) (summarized in the June 2010 issue). This proposal also defines hospital organization, hospital facility, and other key terms.

These proposed regulations describe the information that a hospital facility must include in its written financial assistance policy (FAP) and the methods a hospital must use to widely publicize its policy. The proposal also describes what a hospital must include in its emergency medical care policy. The regulations describe how a hospital determines the maximum amounts (that is, the amounts generally billed (AGB) to individuals who have insurance coverage) it can charge FAP-eligible individuals for emergency and other medically necessary care. In the case of an individual who is FAP-eligible but has not applied for financial assistance at the time charges are made, the regulations provide that a hospital will not fail to satisfy the law if it charges the individual more than the AGB, provided the hospital is complying with all of the requirements regarding notification of individuals about the FAP and responding to the application submitted, including correcting the amount charged and seeking to reverse any extraordinary collection actions previously initiated if an individual is later found to be FAP-eligible.

The proposed regulations describe the actions that are considered extraordinary collection actions and the reasonable efforts a hospital must make to determine FAP eligibility before engaging in the actions. In general, to have made these efforts, a hospital must determine whether an individual is FAP-eligible or provide notices during a period ending 120 days after the date of the first billing statement. Although a hospital may undertake extraordinary collection actions after this period, a hospital that has not determined whether an individual is FAP-eligible must still accept and process a FAP application from the individual for an additional 120 days. Thus, the total period during which a hospital must accept and process FAP applications is 240 days from the date of the first billing statement. If a hospital receives a FAP application during the application period, it must suspend any extraordinary collection actions it has started until it has processed the application and, if it determines the individual is FAP-eligible, must seek to reverse the actions and promptly refund any overpaid amounts. While debts may be referred to third parties to assist with collection actions at any time, including during the 120-day notification period, they may not be sold to third parties during this period unless and until an eligibility determination has been made.

In a preamble to this proposal, Treasury stated that it and the IRS “sought to ensure that patients who may require financial assistance—and the patient advocacy groups that assist them—will have access to the information about a hospital’s FAP that the patients need in order to effectively seek financial assistance.” The government “also sought to preserve hospital facilities’ flexibility to determine the best way to meet the particular health needs of the specific communities they serve,” observing that “[n]either the statute nor these proposed regulations establish specific eligibility criteria that a FAP must contain.” It was also noted that, “aside from prohibiting hospital facilities from charging FAP-eligible individuals more than AGB, neither the statute nor the proposed regulations dictate the amounts or kinds of financial assistance that a FAP must provide.” [7.6(b)]

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