The Patient Protection and Affordable Care Act (ACA) became law eight years ago, establishing §501(r) of the Internal Revenue Code (IRC)—a section most tax-exempt hospitals have become quite familiar with in the years since. The provisions of §501(r) have phased in slowly; one of the most recent is the set of rules regarding a tax-exempt hospital’s financial assistance policy (FAP) for low-income, uninsured patients. The Internal Revenue Service (IRS) recently issued guidance on the final regulations in an article posted on its website.
What’s in the FAP?
Beginning with tax years that started after December 29, 2015, tax-exempt hospitals have been required under §501(r)(4) of the IRC to implement FAPs that meet the specifications of the final Treasury regulation 1.501(r)-4. A hospital’s FAP should include information about:
Even when a tax-exempt hospital drafts the FAP, meeting all above requirements, it does not mean the hospital is in full compliance. The hospital’s board of directors or a board committee authorized to approve the FAP must first approve it; second, the hospital must widely publicize the FAP before being considered fully compliant.
What Do Treasury Regulations Mean by “Widely Publicized?”
Prior to December 29, 2015, the final Treasury regulations stated a hospital could self-determine what is meant by widely publicizing its FAP. Some hospitals gave paper copies to all patients, others made copies available only upon request, while other hospitals would verbally advise patients of the FAP at admission. Final Treasury regulations now outline parameters for widely publicizing the FAP. Specifically, a tax-exempt hospital must:
The method of information conveyance for items 1 through 3 is well-defined and specific, but not so much for items 4 and 5. For instance, it is not clear if posting on a website also satisfies the requirement to notify the general public about the hospital’s FAP. Frequently, those that qualify for financial assistance do not have access to the web to become informed about the FAP.
It is common practice for tax-exempt hospitals to have FAPs and, post-ACA, hospitals are doing an excellent job making FAPs available to the populations they serve. However, there are additional provisions under 501(r) that relate to the FAP, such as:
Now that there is clear guidance, each hospital should closely review its practices surrounding its FAP and ask: does our policy make the grade?
If you have questions about your hospital’s FAP, or would like to request a speaker on this topic for your organization or event, contact a PYA executive below at (800) 270-9629.