Posted On January 08, 2015

IRS issues rules under the ACA for tax-exempt hospitals

Charitable hospitals in Nevada and all other states may obtain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. The Affordable Care Act includes consumer protection provisions for patients of such institutions. Those patients must not be subjected to abusive collection practices, and they must be given complete information about the prospect of obtaining financial assistance from the hospital toward their medical bills. The IRS recently issued final regulations under the ACA to facilitate the protection of patients of charitable hospitals.

The regulations set up various requirements for Section 501(c) (3) hospitals to meet, including the mandatory establishment of emergency medical care and financial assistance policies. The hospitals are required to show that they are limiting the amounts charged for emergency and medically necessary care to those patients eligible for financial assistance. They must also take measures to assure that they are identifying patients who are eligible for the assistance.

The hospitals must also conduct a community health needs assessment and adopt an implementation strategy at least every three years. Where the hospital does not live up to these requirements, an excise tax is to be imposed under the ACA. The IRS and the Treasury Department have made it clear that 501(c)(3) hospitals are held to a higher standard of care with respect to their making financial assistance available and in the fair implementation of such measures.

In addition to the excise tax that could be imposed under the ACA for a hospital’s noncompliance, the institution could lose its tax exempt status. IRS officials reported that hospitals are given a reasonable time to implement the measures and to make policy changes to become compliant. Patients in Nevada and elsewhere should become familiar with the financial assistance policies of charitable hospitals so that they may assure that they are being treated fairly and equally under the law.

Source: accountingtoday.com, “IRS and Treasury Finalize Patient Protection Rules for Tax-Exempt Hospitals“, Michael Cohn, Jan. 2, 2015