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WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING
WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING 2
Agenda
• Background• Financial Assistance Policy• Emergency Medical Care Policy• Limitation on Charges• Extraordinary Collection Actions• Community Health Needs Assessments
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501(r) – The Law
• A hospital is not exempt under 501(c)(3) unless it:– Meets the community health needs assessment
requirements;– Meets the financial assistance policy requirements;– Meets the limitation on charges requirements; and– Meets the billing and collection requirements.
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Safe Harbors
• Safe Harbor #1 – An omission or error is not a failure if:– It was minor;– It was either inadvertent or due to reasonable cause; and– The hospital corrects it as promptly as is reasonable.
• Safe Harbor #2 – an omission or error is excused if:– It was neither willful nor egregious;– The hospital corrects it as promptly as is reasonable; and– The hospital discloses it, either in the next Form 990 or on the
hospital’s website.
• Either safe harbor can be used to avoid loss of 501(c)(3) status.• Only safe harbor #1 can be used to avoid the $50,000 excise tax.
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Significant Decisions – Safe Harbors• Who is responsible for monitoring compliance and implementing
safeguards to avoid future problems?• Who will maintain records to report failures on Form 990?
– Describe the nature of the failure– The cause of the failure– The hospital where the failure occurred– The date(s) of the failure– The date of discovery– The number of occurrences– The method of correction– The date of correction– If applicable, how affected individuals were “restored”– The practices and procedures the hospital revised or newly established to
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The Law – Financial Assistance Policy
• The hospital must have a written FAP that includes:– Eligibility criteria for financial assistance, and whether such
assistance includes free or discounted care;– The basis for calculating amounts charged to patients;– The method of applying for financial assistance;– The actions the hospital may take in the event of non-
payment; and– Measures to widely publicize the policy within the
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Significant DecisionsFinancial Assistance Policy• Will billing and collection information be included in your
FAP or a separate billing & collection policy?• How will you define “medically necessary care?”• How will you notify and inform the community about
financial assistance?• Should you modify your financial assistance eligibility
criteria or benefits?• Who will authorize various changes to the FAP?• Who is responsible for ensuring continuous compliance?• Who will you indicate is available to help complete
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The Law – Emergency Medical Care Policy
• The hospital must have a written emergency care policy that requires the hospital to provide care for emergency medical conditions without discrimination and regardless of the individual’s eligibility under the hospital’s FAP.
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Final Regulation – Limitation on Charges
• For emergency and other medically necessary care, the hospital cannot charge FAP-eligible individuals more than amounts generally billed (“AGB”) for such care.
• For other medical care covered by the FAP, the hospital cannot charge the gross charge (“chargemaster”) amount to FAP-eligible individuals.
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Final Regulation – Limitation on Charges
• AGB can be calculated using either the look-back method or the prospective method.– A hospital can only use one method at a time.– A hospital can change methods as often as it wants.
◊ The FAP and procedures must be updated for the change.– The IRS includes language allowing them to add more
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Final Regulation – Limitation on Charges
• Look-Back Method:– Calculate the following ratio for the prior 12-month period.
– “Health Insurers” means any one of the following:◊ Medicare fee-for-service only◊ Medicaid only◊ Medicaid and Medicare fee-for-service◊ Medicare fee-for-service and all private health insurers◊ Medicaid, Medicare fee-for-service and all private health insurers
AGB = All Claims Allowed by Health Insurers Gross Charges for Those Claims
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Significant Decisions – Limitation on Charges
• Will you use the Look-Back Method or the Prospective Method to calculate AGB?
• If the Prospective Method is chosen, will you use Medicare, Medicaid or both?– If both, in which situation(s) will you use each?
• If the Look-Back Method is chosen, which of the following will you use?– Medicare fee-for-service only– Medicaid only– Medicare fee-for-service and Medicaid– Medicare fee-for-service and all private health insurers– Medicare fee-for-service, Medicaid, and all private health insurers
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The Law – Billing and Collection
• The hospital must not engage in extraordinary collection actions before making reasonable efforts to determine whether an individual is FAP-eligible.
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Final Regulation – Billing and Collection
• Extraordinary collection actions do not include:– A lien asserted on the proceeds of a judgment, settlement or
compromise owed to an individual as a result of a personal injury for which the hospital provided care;
– Filing a bankruptcy claim;– Selling a debt if, prior to the sale, the hospital enters a legally binding
agreement with the buyer in which:◊ The buyer is prohibited from taking any ECAs to obtain payment;◊ The buyer is prohibited from charging interest on the debt in excess of the rate
in effect under §6621(a)(2) at the time the debt is sold;◊ The debt is returnable or callable if the hospital determines that the individual is
FAP-eligible; and◊ If the individual is determined to be FAP-eligible and the debt is not returned to
the hospital, the buyer is required to adhere to conditions in the agreement to ensure the individual is not required to pay more than AGB.
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Final Regulation – Billing and Collection
• Reasonable Effort Method #1:– Use a prior FAP application or 3rd-party information to
presumptively determine an individual is FAP-eligible.– If determination is that the person qualifies for discounted care:
◊ Inform the individual of the determination;◊ Explain how the determination was made;◊ Explain that better financial assistance may be available if they complete a
FAP application;◊ Explain how to apply for financial assistance; and◊ Accept a FAP application submitted within the 240-day window.
– This method cannot be used to presumptively determine an individual is not eligible for financial assistance.
◊ It can be used to make a determination of the likely outcome.◊ A signed waiver is not sufficient.
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Significant Decisions – Billing and Collection
• What extraordinary collection actions will you allow or prohibit?
• Will you initiate any extraordinary collection actions before the 240-day window has closed?
• Will you allow any third parties to take an extraordinary collection action on your behalf?– If so, how will you ensure those actions are taken at the
appropriate time?• Will you use any 3rd-party information to presumptively
determine an individual’s FAP-eligibility?• Who is responsible for continuous compliance?
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Final Regulation - CHNAs
• The CHNA process: every three years, a hospital must:– Define the hospital’s community;– Assess the health needs of the community;
◊ Take into account input from persons who represent the broad interests of the community, including those with special knowledge or expertise in public health
– Document the CHNA process in a CHNA Report that was adopted by an authorized body;
– Make the CHNA Report widely available to the public; and– Develop an Implementation Strategy that responds to the
identified community health needs and that was adopted by an authorized body.