In Treasury Decision TD 9708 the IRS provided final regulations on the charitable health needs assessment (CHNA) requirements under IRC §501(r) for charitable hospital organizations that was originally enacted as part of the 2010 Patient Protection and Affordable Care Act.
In order to obtain status as a §501(c)(3) charitable organization, a hospital must comply with the four requirements found at IRC §501(r)(1):
· Meet the community health needs assessment (CHNA) requirements (defined at IRC §501(r)(3));
· Meet the financial assistance policy (FAP) requirements (defined at IRC §501(r)(4));
· Meet the requirements on charges (defined at IRC §501(r)(5)); and
· Meet the billing and collection requirements (defined at IRC §501(r)(6)
The CHNA must be conducted be conducted by the hospital every three years and the organization must develop a plan to meet community health needs that the assessment identifies. The CHNA must take into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health, and must be made widely available to the public. [IRC §501(r)(3)]
A hospital that fails to meet the CHNA requirements faces a $50,000 excise tax. [IRC §4959]
The organization must establish a written financial assistance policy (FAP) that includes the following:
· Eligibility criteria for financial assistance, and whether such assistance includes free or discounted care,
· The basis for calculating amounts charged to patients,
· The method for applying for financial assistance,
· In the case of an organization which does not have a separate billing and collections policy, the actions the organization may take in the event of non-payment, including collections action and reporting to credit agencies, and
· Measures to widely publicize the policy within the community to be served by the organization. [IRC §501(r)(4)(A)]
The organization must also have a written policy on emergency medical care requiring the organization to provide, without discrimination, care for emergency medical conditions (as defined in the Social Security Act) to individuals regardless of their eligibility under the financial assistance policy. [IRC §501(r)(4)(B)]
The charge requirements are met by the organization if it:
· Limits amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy to not more than the amounts generally billed to individuals who have insurance covering such care, and
· Prohibits the use of gross charges (that is, the facility’s full, established price for medical care it provides before taking into account any contractual allowances entered into with the various insurance carriers) [IRC §501(r)(5)]
To meet the billing and collections requirements the organization must not engage in extraordinary collection actions before the organization had made reasonable efforts to determine whether the individual is eligible for assistance under the financial assistance policy.
The final regulations contain definitions and guidance in handling the items noted above. The IRS had previously issued an initial set of proposed regulations in 2012 dealing with the financial assistance policy, the requirements on charges and the billing and collection policies, a set of proposed regulations on the CHNA requirements in April 2013 and a set of temporary and proposed regulations on the excise tax in August of 2013.
The regulations also contain information on failures that will not be considered significant enough to trigger the $50,000 excise tax, as well as reasonable cause for granting relief from the tax.
The regulations under §501(r) will apply to tax years beginning after December 29, 2015. Taxpayers may rely on reasonable, good faith interpretation of the provisions of §501(r) for years beginning before that date.
The regulations under §§4959 and 6033 and generally apply on or after December 29, 2014 for the §4959 provisions, while the §6033 provisions apply to returns filed on or after December 29, 2014.