Does The IRS Used salami strategy update section 501 (R)?


The Patient Protection and Affordable Care Act (PPACA), set March 23, 2010 and amended by the health and education Reconciliation Act of 2010, the Internal Revenue System (IRS) has added new requirements for hospitals and health care organizations to justify their tax-exempt under the new rules established under section §501 (c) (3) of the Internal Revenue Code.

The new requirements affect the actions and policies of tax-exempt hospital mandating that they follow new rules to serve patients who can not pay for the cost of their medical care. Hospitals and health care systems need to create internal audit and compliance program to provide this new policy.

new requirements for Charitable 501 (c) (3) Hospitals

Section 501 (r) proposes new requirements for 501 (c) (3) organizations that operate one or more hospital facilities. Each 501 (c) (3) hospital organization must meet four general requirements to facility-by-facility basis

• establish written financial assistance and emergency medical care policy;

• Limit the cost of emergency or other medically necessary care to persons eligible under the financial assistance policy of the hospital;

• Make reasonable efforts to determine whether a person is eligible to receive assistance under the financial policy support hospital before engaging in extraordinary collection actions (ECA) against the person; and

• Conduct a community health needs assessment (CHNA) and implementing policy at least once every three years (these CHNA requirements are effective for tax periods beginning after March 23, 2012).

The PPACA also added a new section 4959, which imposes an excise tax for failure to meet the CHNA requirements, and improved reporting requirements part 501 (R) and 4959th If hospital organization part 501 (r) applies fails to meet the requirements of section 4959 of each tax year, a tax equal to $ 50,000 is levied.

The Regulations allow hospitals flexibility in determining how to implement 501 (R) rules to best meet the needs of the communities they serve. However, they provide a detailed outline of how they will operate. The regulation applies to tax periods beginning after December 29, 2015.

These rules will be applied for the hospital organization with close cooperation between regulatory compliance, operations and billing to ensure proper action is taken to address this tax-exempt status requirement. The following is a summary of four general criteria:

1. Written Financial Assistance and emergency care Rules

– The financial assistance policy (FAP) will find all services other than the hospital, deliver emergency or other medically necessary care policy within the financial assistance;

– The hospital may provide financial assistance on the basis of information from sources other than the patient. Also, the hospital can obtain information from patients either orally or in writing;

– The FAP is only required to display the rates under FAP and not more discounts hospitals provide;

– billing statements will contain prominent communicate the availability of financial assistance from the health care organization; and

– emergency care given under section 501 (r) prohibits the collection of disturbing the provision of emergency medical care under the Emergency Medical Treatment & Labor Act (EMTA)

2 .. Limitation on Charges

– A facility can change the amounts charged (AGB) method he uses every time; it just needs to update FAP reflect method and discount rate applied;

– Rules clarify that AGB restriction applies only to the amount that the patient is personally responsible for paying for allowances, discounts and insurance have been applied;

– Medicaid may be included in the calculation themselves or in conjunction with other payers;

– The AGB can be calculated on the basis of all hospital services receive only emergency and medically necessary services; and

-. A reasonable allocation capitated or other lump-sum payments made by the insurer can be incorporated

3. Billing and Collections

– At least one bill after graduation must include a plain language summary of the FAP;

– The hospital will be given oral notice of FAP patients and make it at least 30 days before the initiation of an ECA;

– patient shall receive a copy of ECA policy before treatment;

– liens placed on the part of the potential settlement of profits from auto accidents are not considered ECA;

– The rule requires hospitals to have a written agreement with a third party (collection agencies) to comply 501 (r) requirements;

– Hospitals can set account with a collection agency within 120 days notice period if they meet the requirements;

– The sale of debt to third parties is not considered to ECA. Accounts can not be transferred to the debt buyer until after the notice period; and

– The hospital will be financial policy applications for 240 days notice date of the first billing statement

4 .. CHNA

– A description of the process and methods used to conduct the CHNA must be present;

– The hospital must provide a description of the hospital facility sought and took into account input from the public;

– Overview showing the priority description of the significant health needs and an explanation of the process and the criteria used to identify health need; and

– Description of the resources potentially available to address health need

The IRS has used the salami method to increase scrutiny of tax-exempt health care organizations .. The process has put increasing pressure on internal auditors Healthcare company and to the Compliance Officer assess risk and appropriate create, implement and control standards.

The Salami tactic employed has allowed “a slice of a slice” changes in Section 501 (r) to take place since it was set on March 23, 2010. When stepping back and see a broader change over time, it clearly shows its importance.

little slice changes that have been made by the IRS are all connected to a tremendous change in the way charitable hospitals must operate to keep the tax-exempt status intact. Section 501 (r) is the most important change in the tax exemption standards for hospitals in more than 40 years.


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