IRS regulations to obtain tax-exempt status are 'too rigid' says AHA

Public can give IRS input for 60 days on proposed regulations

July 2, 2012

The Internal Revenue Service's (IRS) proposed regulations  for how not-for-profit hospitals earn tax-exempt status under the Affordable Care Act's (ACA) 501(r) are "sensible" according to the AHA, but not in how they are being implemented.

The regulations specifically define how hospitals should determine how much to charge financial-assistance patients, and exactly how they must publicize their assistance plans, among other clarifications.

Not-for-profit hospitals must:

  • Accept financial assistance applications for 240 days following the first billing statement;
  • Limit charges to those who qualify for financial assistance to not more than the "amounts generally billed to individuals who have insurance covering such care;" and
  • To ensure that patients do not qualify for financial assistance before engaging in "extraordinary collection actions."

AHA General Counsel Melinda Hatton calls the regulations  "good and sensible steps," but AHA is concerned by "the way they've been implemented"—hospitals are held responsible for properly informing patients of financial assistance policies, although hospitals use outside billing and collections firms to take those steps.

Even if a patient visits a hospital multiple times in one week, the patient must be provided with the policies in every bill. According to Hatton, that "redundancy" is burdensome.

The proposals are "very prescriptive," according to Hatton, "when you consider this is only about a quarter of the requirements in the ACA on which tax exemption rests."

Moreover, Hatton says the penalty for failing to do so "is not a $50 fine—it's losing your tax exemption."

The public can give the government agency input for 60 days following publication in the Federal Register (Modern Healthcare, 6/22 [subscription required]; Reichard, CQ Healthbeat, 6/25 [subscription required]).

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