Public comment on a proposed enforcement framework closed last week. Hospitals are also waiting for final regulations on the billing, collection, financial aid and community needs assessment criteria that will be policed under that framework.
The IRS proposed three tiers for enforcement. Hospitals that correct minor missteps won't lose tax breaks. But hospitals that commit “willful or egregious” violations will face potential loss of tax exemption.
The Catholic Health Association, a Washington-based trade group, commented that such violations should be limited to those “of the utmost seriousness.” The AHA, based in Chicago, called on the IRS to define or clarify “egregious” as well as “willful” violations that will trigger loss of tax exemption. “Hospitals should be fully informed of how the Treasury (Department) will interpret the two most consequential terms for maintaining tax-exempt status.”
Julie Trocchio, senior director of community benefit and continuing care for the CHA, said examples would help hospitals understand what could be considered a major violation.
Finally, any violation that falls between minor (and not penalized) and egregious (with risk of taxation) may not necessarily trigger an enforcement action if hospitals disclose and correct the violation.
The AHA argued that hospitals risk “unreasonable uncertainty” in that middle ground and called for the IRS to create a so-called rebuttable presumption when hospitals report and correct infractions.
That would give hospitals “the benefit of the doubt” if they follow the rules, said Melinda Hatton, general counsel for the AHA. Hospitals could correct and disclose violations without having to wonder and worry about whether they have satisfied IRS requirements, said Maureen Mudron, the trade group's deputy general counsel and author of the AHA's comment letter.
Hospitals are also seeking more time to conform to rules for billing, collection and financial aid efforts, once regulators finalize them, Trocchio said. Changes to policies and training from current practice could be significant. Hospitals cannot pursue “extraordinary” collection practices until they have made a reasonable effort to identify whether patients are eligible for financial aid, under the law. Proposed rules, which Trocchio called “very detailed,” set new schedules for how long hospitals must wait before taking action and which actions, such as reporting to a credit bureau, are considered extraordinary.
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