The Internal Revenue Service has issued final guidance to not-for-profit hospitals on the thorny issue of billing and collections, codifying consumer protections that providers must follow to keep their tax-exempt status.
The IRS first proposed guidance on this issue in 2012, when hospitals had asked for clarification on their responsibilities under the Patient Protection and Affordable Care Act. The ACA holds hospitals to new standards for their financial interactions with patients. However, after seeing the proposed guidance, hospitals argued that the IRS had set the bar far higher than Congress intended.
In its final guidance, the IRS acknowledged some of hospitals' concerns, such as the amount of time and paperwork that would be required, and made some modifications to the final rules (PDF).
The four consumer protection requirements outlined under the ACA are: hospitals may not charge patients who are eligible for financial assistance more than patients who have insurance; hospitals must establish and publicize a financial assistance policy that clearly states the eligibility criteria; hospitals are prohibited from engaging in “extraordinary collection practices” until they have made an effort to determine whether a patient is eligible for financial assistance; and hospitals must conduct a community needs assessment at least once every three years.
The new rules clarify that hospitals must provide non-English translations for their financial assistance policies if at least 5% of their communities, or 1,000 people, whichever is lower, speak that language. They also must make a good-faith effort to comply immediately—the final rules go into effect for taxable years beginning Dec. 29, 2015.
In an attempt to lighten the load for providers, the rules state that hospitals do not need to provide oral notifications of their financial assistance policies unless they intend to use “extraordinary collection actions,” which the rules define as reporting a debt to a collection agency, selling it to a third party or garnishing wages.
The IRS also clarified that it will require hospitals to make a good-faith effort to ensure that their vendors are compliant with the rules, which had been a key concern for providers.
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