Proposed Rule Ensures Access to Financial Assistance from Charitable Hospitals

Guidance for charitable hospital organizations related to financial assistance and emergency medical care policies, charges for certain care provided to individuals eligible for financial assistance, and billing and collections were issued in the form of proposed regulations by the Internal Revenue Service on June 22, 2012. Under the proposed rules, which were mandated by the Patient Protection Affordable Care Act (PPACA) (111-148) (enacting §501(r) of the Internal Revenue Code), as a condition of receiving tax-exempt status (§501(c)(3) organizations), charitable hospitals would be required to establish billing and collections protections for patients eligible for financial assistance and provide patients with the information needed to apply for such assistance (see IRC §501(r)(4) – (r)(6)).

The purpose of the proposed regulations is to ensure access to financial assistance for patients of charitable hospitals and protect patients from abusive collections practices. The proposed regulations clarify hospitals’ responsibilities under the new statutory provision, promoting patients’ access to health care and financial assistance and transparency in financial assistance policies, while recognizing hospitals’ need for manageable rules governing their health care operations and financial affairs, according to a U. S. Treasury news release.  The key elements of the proposed regulations include: 

Financial assistance policy. Each tax-exempt hospital must establish a written financial assistance policy (FAP). The FAP must apply to all emergency and other medically necessary care provided by the hospital. It must describe the eligibility criteria for receiving financial assistance, including whether such assistance includes free or discounted care, the basis for calculating the amount charged to patients, the method for applying for financial assistance and, when appropriate, the actions that may be taken in the event of nonpayment.  

Additionally, the proposed regulations describe how a hospital must widely publicize its FAP to ensure that community members are aware that aid is available (see proposed rules §1.50(r )(b)). Widely publicizing the FAP includes making the FAP application form and a plain language summary of the FAP widely available on the organization’s website and paper copies available upon request with no charge, informing visitors to the facility about the FAP through public displays, and informing residents of the community about the FAP in a manner reasonably calculated to reach those who are most likely to require financial assistance. In addition, a hospital must account and provide for those residents of the community with limited English proficiency if more than 10 percent of the residents of the community served by the hospital have limited English proficiency.

Emergency care policy. The emergency care policy requires hospitals to establish a written policy requiring hospitals to provide, without discrimination, care for emergency medical conditions (within the meaning of the Emergency Medical and Active Labor Act (EMTALA) to individuals regardless of whether they are FAP eligible.  Under the proposed rule, a hospital’s emergency medical care policy must prohibit debt collection activities from occurring in the emergency department or in other hospital venues where such activities could interfere with the treatment of emergency medical conditions without discrimination. 

Limitation on collection actions. A tax-exempt hospital is prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until it makes reasonable efforts to determine whether an individual is eligible for the financial assistance it offers. Under these proposed rules, charitable hospitals must:

  •  provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
  • give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
  • give the patient an additional 120 days (for 240 days total) to submit a complete application;
  • if a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

Limitation on charges. Under the proposed rule, a hospital may not charge individuals eligible for its financial assistance more for medically necessary care than the amounts generally billed to individuals who have health insurance. The proposed rule includes a safe harbor to help hospitals comply with this requirement when they do not know whether a patient is eligible for assistance. If a person has not submitted an application for financial assistance, the hospital may bill the person at its usual charges if the hospital has made reasonable efforts to determine whether the person is eligible for financial assistance. If the person is eligible for aid, the hospital must refund any excess payments made.

Billing and collection. A hospital organization must not engage in extraordinary collection actions against an individual before the hospital facility has made reasonable efforts to determine whether the individual is eligible of assistance under its FAP. Extraordinary collection actions include any actions against any other individual who has accepted or is required to accept responsibility for the individual’s hospital bills.  The hospital facility be deemed to have engaged in extraordinary collection actions against the individual if ay purchaser of the individual’s debt or any debt collection agency or other party to which the hospital facility has referred the individual’s debt has engaged in such practices against the individual.