IRS Changes Nonprofit Hospitals Collection Rules
On December 30, the IRS published new rules regarding how nonprofit hospitals are able to collect payments from their patients. The rule change came about to counter aggressive collections tactics used by some hospitals.
Under the new rules, nonprofit hospitals now cannot charge patients who are eligible for financial assistance more for emergency or other medically necessary care than what would be charged to those who are covered by Medicare, Medicaid or private insurance.In addition, nonprofit hospitals are now forbidden from reporting a patient’s debt to credit agencies or garnish wages before making “reasonable efforts” to determine if they are eligible for financial assistance under hospital policy. While nonprofit hospitals are still required to provide charity care, they have the ability to set their own benchmark for eligibility.Additional requirements under the new regulations issued by The Department of the Treasury include:
- Hospitals must perform a community health needs assessment at least once every three years. They also need to disclose the programs addressing those needs in annual tax forms with the IRS. Those who don’t adopt an implementation strategy or properly perform a community health needs assessment must pay an excise tax.
- Financial assistance policies must be translated into languages used by 5 percent of the community’s population or at least 1,000 individuals, whichever is less. That was reduced from 10 percent in an earlier proposal.
- Hospitals are now required to have their assistance policies appear on bills and throughout the facilities. When aggressive collections actions are being used (reporting debt or trying to garnish wages), written and oral notifications must be performed.
Heartland Regional Medical Center in St. Joseph, Missouri was one of the targeted hospitals. In 2013, the Missouri hospital filed 2,300 lawsuits against patients. While that practice will not likely disappear altogether, the new rules will most likely significantly reduce those numbers.
“Reports 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,” wrote Emily McMahon, Treasury Department deputy assistant secretary for tax policy. “For hospitals to be tax-exempt, they should be held to a higher standard.”
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