Tuesday, April 25, 2017
Internal Revenue Service

IRS Review of Tax Exempt Hospitals

On September 28, 2016 the Tax Exempt and Government Entities Division of the IRS issued its work plan for fiscal year 2017.  (Available here https://www.irs.gov/pub/irs-tege/tege_fy2017_work_plan.pdf )  The plan includes information on examinations of tax exempt organizations that took place during fiscal year 2016. The IRS completed 692 reviews of hospitals as of June 30, 2016 and 166 of them were referred for further field examination.  The reasons for the referrals were related to Financial Assistance and/or Emergency Medical Care Policies, Billing & Collection Requirements, and lack of a Community Health Needs Assessment.

·      Sen. Grassley Requests Update from IRS on Section 501 r

Sen Grassley has asked the IRS for information on the implementation and enforcement of Section 501 r  provisions.  In a June 2016  letter to the IRS, Sen Grassley has asked the IRS to provide information on the number of nonprofit hospitals the IRS has found to be out of compliance with the financial assistance and billing/collection requirements.  He also asked to be updated on any enforcement action the IRS has taken against nonprofit hospitals found to be out of compliance with either these provisions.

Treasury Issues Final Rule on Section 501 r  

The Treasury Department and the IRS released, in December 2014, the final regulations on Section 501 r.  The announcement stated that provisions were designed to protect consumers. As a condition of their tax-exempt status, charitable hospitals must take an active role in improving the health of the communities they serve, establish billing and collections protections for patients eligible for financial assistance, and provide patients with the information needed to apply for such assistance. 

The final regulations provide guidance regarding the requirements for charitable hospital organizations added by the Patient Protection and Affordable Care Act of 2010. The regulations will affect charitable hospital organizations. 

The final regulations are available here:  https://www.federalregister.gov/articles/2014/12/31/2014-30525/additional-requirements-for-charitable-hospitals-community-health-needs-assessments-for-charitable


On April 5, 2013, the IRS published a notice of proposed rulemaking in the Federal Register on the community health needs assessment requirement that was included in the Affordable Care Act.  The rule is available at:  https://www.federalregister.gov/articles/2013/04/05/2013-07959/community-health-needs-assessments-for-charitable-hospitals 

If you are interested in learning more about this proposed rule, go to the Contact Us section on this website and include IRS CHNA Proposed Rule in the message box.

The proposed CHNA rule was preceded by IRS proposed regulations to implement the Affordable Care Act provisions on financial assistance and related policies that were published on June 22, 2012.  These newly proposed regulations are available at http://www.irs.gov/pub/irs-drop/reg-130266-11.pdf

The Affordable Care Act and Section 501 r requirements

The Patient Protection and Affordable Care Act (ACA), passed early in 2010, included new requirements that hospital organizations must meet in order to maintain their federal tax exemption. These new provisions require hospitals to have written financial assistance and emergency medical care policies, limit fees charged to patients eligible for financial assistance, comply with collection restrictions, and conduct regular community health needs assessments and develop health improvement plans. The ACA directs the Internal Revenue Service (IRS) to establish Section 501(r ) of the Internal Revenue Code to implement these new requirements. The IRS has revised Form 990, Schedule H http://www.irs.gov/pub/irs-pdf/f990sh.pdf  for use by hospitals to report on these provisions.

Hospitals and other interested parties are encourage to visit the IRS website for up-to-date information, as the IRS develops guidance and updates forms and instructions related to Section 505 (r ). http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/New-Requirements-for-501%28c%29%283%29-Hospitals-Under-the-Affordable-Care-Act

HFMA Releases Medical Account Resolution Best Practices – Jan 2014:  Copies of the Best Practices developed by the Healthcare Financial Management Association’s National Medical Debt Advisory Task Force can be found at http://www.hfma.org/medicaldebt/

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