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Treasury Notes

 Treasury Finalizes Patient Protection Regulations for Tax-Exempt Hospitals

By: Emily McMahon
12/29/2014

 
 
Charitable hospitals represent more than half of the nation’s hospitals and play a key role in improving the health of the communities they serve. But reports that some charitable hospitals have used aggressive debt collection practices, including allowing debt collectors to pursue collections in emergency rooms, have highlighted the need for clear rules to protect patients. For hospitals to be tax-exempt, they should be held to a higher standard. That is why the Affordable Care Act (ACA) included additional consumer protection requirements for charitable hospitals, so that patients are protected from abusive collections practices and have access to information about financial assistance at all tax-exempt hospitals.
 
Today, the U.S. Department of the Treasury took the final step to provide guidance on these provisions, many of which are already in effect, 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. These final rules adopt the same framework of proposed regulations but simplify the compliance process for charitable hospitals, while continuing to provide meaningful guidance on protections for patients and requirements to assess community health needs.
 
With these final rules in place, Treasury has taken an important step in protecting patients and holding charitable hospitals to a higher standard in meeting the health needs of their communities. Specifically, today’s final regulations provide guidance on the statutory requirements that charitable hospitals:
     
  • Limit charges.  Hospitals may not charge individuals eligible for financial assistance more for emergency or other medically necessary care than the amounts generally billed to patients with insurance (including Medicare, Medicaid, or private commercial insurance).
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  •  Establish and disclose financial assistance policies.  Each hospital must establish and widely publicize a financial assistance policy that clearly describes to patients the eligibility criteria for obtaining financial assistance and the method for applying for financial assistance.
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  • Abide by reasonable billing and collection requirements.  Charitable hospitals are prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until they make reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy.
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  • Perform a community health needs assessment.  Each charitable hospital must conduct and publish a community health needs assessment at least once every three years – and disclose on the tax form it files annually the steps it is taking to address the health needs identified in the assessment.
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  • These requirements are in addition to other consumer protections provided by the ACA, including that all hospitals must establish and make public a list of standard charges for items and services. The Centers for Medicare & Medicaid Services (CMS) issued final rules implementing this provision in August, and encouraged hospitals to make additional efforts to help patients understand how much services may cost and enable them to compare charges for similar services at different hospitals.
In response to comments from stakeholders on the proposed regulations, today’s final regulations maintain a high level of protection for consumers while providing additional flexibility to help charitable hospitals comply with the requirements. For example, the final rules:
  • Expand access to translations for patients, by lowering the threshold for having translations of financial assistance policies available from 10 percent of the community served as proposed, to five percent of the community served or population expected to be encountered by the hospital facility, or 1000 persons, whichever is less.
  • Revise the notification requirements to maintain important protections for patients while making it easier for hospitals to comply with them. General notifications regarding a hospital’s financial assistance policy must appear on bills and in the hospital. However, individual written and oral notifications of the hospital’s financial assistance policy are now only required when a hospital plans to use extraordinary collections actions, such as reporting a debt to a credit bureau, selling the debt to a third party or garnishing wages.
  • While charitable hospitals must continue to make a good-faith effort to comply, the rules provide charitable hospitals with adequate time to fully update their policies and programming to implement the changes.
If a charitable hospital fails to meet the consumer protection provisions required by the law, the hospital could have its tax-exempt status revoked.  If a hospital fails to properly conduct a community health needs assessment or adopt an implementation strategy, an excise tax will apply. However, if a hospital fails to meet a requirement, but the failure is neither willful nor egregious, the hospital can correct and publicly disclose the error to have it excused, thus avoiding revocation of tax-exempt status, but the excise tax would still apply.
 
In practice, many of these requirements took effect shortly after the ACA passed in 2010. Charitable hospitals have been required to make a good-faith effort to comply with the statutory requirements since the law was passed, and have been able to rely on Treasury’s proposed regulations pending finalization. Today’s regulations finalize these requirements and provide time for hospitals to phase in the new requirements.
 
Emily McMahon is the Deputy Assistant Secretary for Tax Policy at the U.S. Department of the Treasury. ​
 
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Posted in:  Category 1
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