When it comes to managing a hospital’s policies and procedures, hospital executives have a lot on their hands. From ensuring proper medical protocol to maintaining rigorous reporting standards, healthcare professionals are already overwhelmed.
Staying on top of IRS regulations is critical for hospitals to maintain their tax-exempt status. IRS 501(r)(4) compliance is one of the most crucial aspects of the 501(r) requirements and managing those requirements can be tedious. Many hospital executives are taking a different approach, though.
Why IRS 501(r) Compliance is Critical to Hospitals
Tax-exempt hospitals in the United States have a set of requirements they must adopt to maintain their IRS 501(c)(3) status. In addition to the general requirements for tax-exempt status, as of December 29, 2014, hospitals must follow these new guidelines:
- Community Health Needs Assessment: Every hospital must conduct a CHNA once every three years and implement strategies to address any issues the assessment uncovers.
- Financial Assistance Policy and Emergency Medical Care Policy: Each hospital facility needs to establish written policies for financial assistance criteria and emergency medical care definitions.
- Limitation on Charges: Hospitals need to have a limit on what they charge for medically-necessary services provided to FAP-eligible patients.
- Billing and Collections: Tax-exempt hospitals must create a billing and collections policy that allows patients to apply for financial assistance before collections activities take place.
All hospitals are required to follow these requirements, as well as adopt new reporting requirements that include updates about community services the hospital provided during the year.
Hospitals that don’t adhere to the IRS 501(r) compliance standards and reporting requirements are at risk of losing their IRS 501(c)(3) tax-exempt status.
How Medical Billing Software Can Improve IRS 501(r) Compliance
The additional IRS requirements can create a lot of extra work for hospital executives. Between addressing healthcare issues found in the CHNA and creating policies that adhere to all of the requirements, healthcare professionals have an overwhelming responsibility.
One way to reduce the burden of the new requirements is with medical billing software. Technology is a powerful tool when it comes to streamlining processes and reducing compliance errors.
The top reasons to invest in medical billing software for IRS 501(r) compliance are:
- Increased efficiency: Medical billing software offers a streamlined way for patients to easily apply for financial assistance for their healthcare needs.
- Improved patient experience: Patients want to be able to apply online, by mail, or over the phone, and they want to receive decisions quickly.
- Rigid compliance standards: Technology ensures that data is held securely and all information is used and held to the highest standards required by the IRS.
The right medical billing software system will give hospitals a practical dashboard, the ability to control client-specific financial decision-making, and reporting that meets the Form 990 qualifications.
How to Effectively Manage IRS Section 501(r)(4)
As part of the IRS Section 501(r) requirements, every hospital facility must establish a written policy for both financial assistance and emergency medical care. Both components are packed with a lot of minor requests from the IRS.
Financial Assistance Policy
The financial assistance policy (FAP) governs how patients qualify for financial aid with their medical care, especially as it relates to emergency care. The FAP must include:
- Eligibility criteria: Every hospital must establish their criteria for offering financial assistance to its patients, whether it is free or discounted.
- Patient charges: To stay within the limitation on charges, hospitals must keep their patient charges in line with the Amounts Generally Billed (AGB) and disclose that information to patients.
- Financial assistance application: The FAP must clearly state how patients can apply for financial assistance, as well as describe what information or documentation may be necessary to apply.
- Unpaid medical bills: With or without a separate billing and collection policy, hospitals must outline what actions may be taken if a bill remains unpaid and all efforts have been made to ensure FAP-eligibility.
- Outside sources: Any information that a hospital obtains about a patient that didn’t come from the patient itself must be disclosed along with a description of how the information was used.
- Other providers: Hospitals must provide a list of providers offering emergency or medically-necessary care and whether or not they are covered by the financial assistance policy.
In addition to this information, the financial assistance must be widely available to the public. This means the policy, application form, and plain-language summary should be available on the hospital’s website. Paper copies should be available in public places like hospitals or available for free by mail, and community members should be informed so they can disseminate information to the appropriate people.
To satisfy the website requirements of IRS Section 501(r)(4), a hospital must do these three things:
- Provide a complete, current copy of the FAP document on the hospital facility’s website with a clear link indicating what the documents are. If the hospital facility doesn’t have its own website, the hospital organization website is suitable, provided the link back to the FAP document is very conspicuous.
- Offer a copy of the FAP document that anyone can access, download, print, or view without any special computer equipment – hardware or software. The document must be free to download and accessible without anyone providing any information or creating an account.
- Keep the website address of the FAP documents readily available to provide them to anyone who asks about accessing them.
If all of these conditions are met, a hospital facility is considered to have made its financial assistance policy widely available to the public.
Emergency Medical Care Policy
Part of IRS Section 501(r)(4) focuses on how emergency medical care is handled for all patients, not just those who are FAP-eligible. Emergency medical care can have many definitions, but it’s commonly defined in the Emergency Medical Treatment and Labor Act (EMTALA), a section of the Social Security Act.
Subchapter G of Chapter IV of Title 42 of the Code of Federal Regulations, a subchapter of the EMTALA that focuses on the standards of the Centers for Medicare and Medicaid Services (CMS), dictates what medical conditions a hospital facility must provide. If a hospital facility provides care that meets these standards, it will generally satisfy this particular standard.
The emergency medical care policy must also prohibit a hospital facility from discouraging patients from seeking emergency care. This includes, but is not limited to, requiring payment before emergency medical care is performed or allowing debt collection to happen in the hospital or emergency department.
Why Every Hospital Needs to Focus on IRS Section 501(r)(4)
Aside from ensuring that every hospital retains its tax-exempt status, IRS Section 501(r)(4) provides an opportunity for hospitals to offer their services to the community.
A clear financial assistance policy will reduce how long it takes to make a decision, clarify any confusion patients may have, and offer security to people who cannot afford healthcare.
