On Monday, December 29, 2014, the Treasury Department adopted a Final Rule governing the charging and debt collection practices of tax-exempt hospitals.

The Final Rule has four main provisions:

  1. Charge Limits – Hospitals may not charge individuals eligible for financial assistance more for emergency or other medically necessary care than the amounts generally billed to patients with insurance (including Medicare, Medicaid, or private commercial insurance).
  2. Financial Assistance Policies – Each hospital must establish and widely publicize a financial assistance policy that clearly describes to patients the eligibility criteria for obtaining financial assistance and the method for applying for financial assistance.
  3. Reasonable Billing and Collection Requirements – Charitable hospitals are prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until they make reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy.
  4. Community Health Needs Assessment – Each charitable hospital must conduct and publish a community health needs assessment at least once every three years – and disclose on the tax form it files annually the steps it is taking to address the health needs identified in the assessment.

The Treasury Department contends that the new rules provide additional flexibility over proposed rules in the following ways:

  • Expand access to translations for patients, by lowering the threshold for having translations of financial assistance policies available from 10 percent of the community served as proposed, to five percent of the community served or population expected to be encountered by the hospital facility, or 1000 persons, whichever is less.
  • Revise the notification requirements to maintain important protections for patients while making it easier for hospitals to comply with them. General notifications regarding a hospital’s financial assistance policy must appear on bills and in the hospital. However, individual written and oral notifications of the hospital’s financial assistance policy are now only required when a hospital plans to use extraordinary collections actions, such as reporting a debt to a credit bureau, selling the debt to a third party or garnishing wages.
  • While charitable hospitals must continue to make a good-faith effort to comply, the rules provide charitable hospitals with adequate time to fully update their policies and programming to implement the changes.

According to a blog post by Emily McMahon, Deputy Assistant Secretary for Tax Policy, “[R]eports that some charitable hospitals have used aggressive debt collection practices, including allowing debt collectors to pursue collections in emergency rooms, have highlighted the need for clear rules to protect patients.”

“For hospitals to be tax-exempt, they should be held to a higher standard. That is why the Affordable Care Act (ACA) included additional consumer protection requirements for charitable hospitals, so that patients are protected from abusive collections practices and have access to information about financial assistance at all tax-exempt hospitals…. As a condition of their tax-exempt status, charitable hospitals must take an active role in improving the health of the communities they serve, establish billing and collections protections for patients eligible for financial assistance, and provide patients with the information needed to apply for such assistance.”

“These final rules adopt the same framework of proposed regulations but simplify the compliance process for charitable hospitals, while continuing to provide meaningful guidance on protections for patients and requirements to assess community health needs.”

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