The IRS has issued guidance describing how tax-exempt hospitals should comply with the Affordable Care Act ("ACA") requirement that they provide and update a list of providers (e.g. doctors), who are covered by the hospital's Financial Assistance Policy.
Background
The Affordable Care Act imposed several new requirements for charitable hospitals to maintain their tax-exempt status. Among these is an obligation to maintain a Financial Assistance Policy (the "Policy"). The Policy must state (i) eligibility criteria for financial assistance, and whether such assistance includes free or discounted care, (ii) the basis for calculating amounts charged to patients, (iii) the method for applying for financial assistance, and (iv) in the case of an organization which does not have a separate billing and collections policy, the actions the organization may take in the event of non-payment, including collections action and reporting to credit agencies. A tax-exempt hospital must also take measures to widely publicize the policy within the community served by the hospital.
The Policy must cover all emergency and medically necessary care provided in the hospital facility to the extent that the care is provided by the hospital facility itself or a substantially-related entity. In addition, IRS regulations finalized in December 2014 require the hospital's Policy to include a list of providers, other than the hospital facility itself, who deliver emergency or other medically necessary care in the hospital facility, and to state which providers are covered by the Policy and which are not. Providers for this purpose include non-employee physicians and medical groups that provide services within the hospital.
Concerns over Provider List Requirement
According to the IRS, it has received comments expressing concern by hospital facilities utilizing non-employee providers delivering emergency or medically necessary care. Commenters have told the IRS that larger hospitals may change their providers frequently because physicians move or change aspects of their practice. At the same time, community health care advocates have commented that providing a comprehensive list of providers is valuable to patients who would otherwise be unable to obtain this information, and without which it would be impossible for the patient to evaluate what financial assistance may be available.
The IRS also received a number of practical questions regarding how to comply with the Policy regulations. For example, hospitals have asked whether they must include the entire provider list as part of the Policy, or whether they could provide the list in a separate document. Other commenters have asked the IRS whether the provider list could specify care covered by the Policy by department or by type of service, provided that all of the providers in the department or all who provide the service are covered by the Policy.
IRS Guidance
In response to the comments received, the IRS has provided a series of operating rules to be used by Hospitals when incorporating providers into the Policy:
- If emergency or other medically necessary care is provided by a practice group, and the hospital's Policy applies to every member of the group, the Policy need not list each individual doctor that may provide care. Instead, the Policy may include the name of the practice group and indicate which services of the practice group are covered by the Policy. Alternatively, a hospital facility may specify providers by reference to a department or a type of service if the reference makes clear which services and providers are covered.
- If a provider is covered by a hospital's Policy in some circumstances but not in others, the hospital facility must describe the circumstances in which the emergency or other medically necessary care delivered by the provider will and will not be covered by the Policy (e.g. if a doctor's services in the emergency department are covered by the Policy, but services outside the emergency department are not).
- A hospital's provider list must indicate whether the services of a particular provider are or are not covered by the hospital facility's Policy. However, the Policy need not state whether that provider's services are covered by another entity's financial aid policy or program.
- A hospital facility may maintain the list of providers in a document separate from the Policy, such as in an appendix, provided that the document includes the date on which it was created or last updated.
A hospital is required to establish a Policy for each facility that it operates. A hospital is treated as having "established" a Policy for a facility only if an authorized body of the facility has adopted the policy for the facility and the facility has implemented the policy. However, if the only change that the facility makes to its Policy is to update its provider list, the update does not need to be adopted by an authorized body of the facility for the Policy to continue to be considered "established."
Minor omissions and errors that are either inadvertent or due to reasonable cause are not considered failures to provide a Policy if the omissions and errors are promptly corrected. For this purpose, a hospital facility will be treated as having promptly corrected minor errors or omissions if it updates its list of providers, corrects erroneous information, and deletes obsolete information at least quarterly.
The new guidance is effective for tax years beginning after December 29, 2015. IRS Notice 2015-46, 2015-28 I.R.B.