The Internal Revenue Service is soliciting public comment on its draft interpretation of the provisions in the health reform law that affect how tax-exempt hospitals handle billing for needy patients and what community-benefit projects they use to justify their favored tax status.
IRS seeks input on interpretation of new charity rules
The healthcare reform law added requirements for not-for-profit hospitals in four specific areas: community health needs assessments must be completed every three years; financial assistance policies for needy patients must be widely publicized; hospitals can charge only their “best rates” for medically necessary care of needy patients; and hospitals cannot initiate “extraordinary” collections processes until they ensure the patients did not qualify for aid.
In its notice, the IRS said the requirements must be followed on a facility-by-facility basis for systems that operate more than one hospital. The revenue service also noted that failure to complete the triennial community-benefit needs assessment will result in a $50,000 excise tax on the hospital.
The IRS also interpreted several aspects of the law. For example, with regard to defining the “best rate” for any particular service, the agency said hospitals could choose whether to charge the lowest contracted rate with a commercial insurer, or an average of the three best negotiated commercial rates. Another technical explanation defines “extraordinary” collections actions as the filing of lawsuits, residential liens, arrests and “body attachments.”
The IRS is accepting public comments and requests for guidance through July 22.
The new rules for tax-exempt hospitals apply to tax years beginning after March 23, with the exception of the requirement for community needs assessments, which are effective for tax years beginning after March 23, 2012.
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