This year will likely see the final release of Internal Revenue Service’s regulations for hospitals to maintain their tax-exempt status. In the meantime, the IRS has advised professionals in the health care and collection industries to follow the proposed guidelines to determine if they are in compliance.
During a Jan. 21 online seminar for the Healthcare Financial Management Association, Michael Engle, a partner with BKD CPAs and Advisors in Kansas City, Mo., discussed preparation for the regulations. Requirements for a hospital to maintain its nonprofit status, set by the IRS and mandated by the Affordable Care Act, include:
• Establishing written financial assistance and emergency medical care policies.
• Limiting amounts charged for emergency or other medically necessary care to individuals eligible for assistance to not more than amounts billed to people with insurance for the care.
• Determining if an individual is eligible for financial assistance before using extraordinary collection practices.
• Conducting a community health needs assessment and adopt an implementation strategy at least once every three years.
Engle said hospitals are also required to make their financial assistance policies widely available to the public, and a plan needs to be in place to aid with that process. “Very few (hospitals with) financial policies today have ideas how they are going to make it widely available,” he said.
Because the regulations specify that hospitals are responsible for actions of their agencies, it is essential that hospitals and collection agencies work closely. “If the agency breaks the law, the hospital is considered as having broken the law as well,” Engle said. At this time, if a hospital is trying to comply with the regulations and makes a mistake, it is not grounds for the IRS to remove its tax-exempt status, according to Engle.
Instead, the proposed regulations are in place to allow hospitals to correct any mistakes. Hospitals should rely on following the proposed regulations until the IRS publishes a final rule, said Roberta Schultz, director of operations at Minnesota-based revenue cycle management company ProSource. Schultz is quite familiar with the proposed regulations, as they are similar to requirements that have been in place in Minnesota for several years.
“The regulations revolve around ensuring accounts are billed properly to all third-party payers, self-pay amounts are validated as correct and truly owed and patients are aware of financial assistance,” Schultz said. “Patients must be given the opportunity to apply for charity care, and uninsured patients should be given the same discount as the facilities ‘most favored payer.’”
Schultz said it is important that patients know what their financial options are and for hospitals and collection agencies to document communication. “You need to have a very compliant agency that understands and has technology and (an) electronic process in place to ensure that accounts are handled appropriately,” she said. Schultz advises hospitals to use consistent “patient due diligence” to comply with the IRS regulations. Patient account records should include details about dates when bills are sent, dates of patient contact and, most importantly, Schultz said, if they were informed about the hospital’s financial assistance policy and given an application.
Hospitals could verbally notify patients about the financial assistance policies through a recording on their phone line or through providing copies at their location and online. As Engle mentioned, collaboration between collection agencies and hospitals is important in following the regulations. Schultz said technology can help ensure an agency has access to hospitals’ systems to answer and record actions, and to allow providers to view that information.
“There is a technology answer to just about all of the requirements of the regulations, but it takes a lot of investment, time and complete understanding before the technology is effective,” she said.
http://1.usa.gov/1fCTPWL (IRS regulations)