The Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, 2010, P.L. 111-148 (the “Act”) imposes four additional requirements on charitable hospitals to maintain their tax-exempt status, in addition to the general requirements of section 501(c)(3).
1. Community Health Needs Assessment: The charitable hospital must conduct a community health needs assessment that (i) takes into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health and (ii) is made widely available to the public. The hospital must also adopt an implementation strategy to meet the community health needs identified in the assessment.
2. Financial Assistance Policy Requirements: The charitable hospital must establish policies relating to financial assistance and emergency medical care. The financial assistance policy must include (a) eligibility criteria for financial assistance, and whether it includes free or discounted care; (b) the basis for calculating amounts charged to patients; (c) the method for applying for financial assistance; (d) for organizations without a separate billing and collections policy, the actions the organization may take in the event of nonpayment, including collections action and reporting to collections agencies; and (e) the measures taken to publicize widely the policy within the community being served by the organization. The emergency medical services policy must provide, without discrimination, care for emergency medical conditions to individuals regardless of their eligibility under the financial assistance policy.
3. Requirements on Charges: The charitable hospital must limit the amount charged for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy described above to not more than the lowest amounts charged to individuals who have insurance covering such care.
4. Billing & Collection Requirements: The charitable hospital must not engage in extraordinary collection actions before it has made reasonable efforts to determine whether the individual is eligible for assistance under the financial assistance policy described above.
For hospital organizations with more than one hospital facility, these requirements must be met for each hospital facility. Facilities that are not in compliance will not be treated as 501(c)(3) organizations. If a hospital fails to meet these requirements for any taxable year, a tax of $50,000 will be imposed on the organization.
As part of its annual reporting to the IRS, a charitable hospital must provide (i) a description of the efforts taken by the organization to address the needs indemnified in the community health needs assessment and (ii) its audited financial statements.
A charitable hospital should take steps immediately to ensure it is meeting these requirements to avoid a burdensome tax and the possible loss of its tax-exempt status.