moderator: gail burke – the manchester group panel members: jerry “rusty” ingalls – nfv...

MODERATOR: GAIL BURKE – THE MANCHESTER GROUPPANEL MEMBERS: JERRY “RUSTY” INGALLS – NFV HEALTHCARE GROUP DEBORAH KELLY – FCS SERVICES MANDY HALL – BCA FINANCIAL SERVICES AMY MANNING – MUNROE REGIONAL MEDICAL CENTER

Panel Discussion The Proposed IRS Section 501(r)

Plantation on Crystal RiverAugust 10, 2012

Presents….

Today’s ObjectivesPanel Member IntroductionsOpening CommentsSlide PresentationPanel DiscussionQuestions from the Attendees

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Panel Discussion - Proposed IRS Section 501 (r)

IRS Section 501(r)


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Today’s Objectives: Introduce PPACA and Section IRS 501(r)

Additional slides are included that will not be covered Additional background and resources

Precautions Outline areas requiring process and/or policy change Hospital Impact How to stay informed Managing change Group discussion of concerns, questions, next steps

IRS Section 501(r) – Opening Comments


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Opening Comments

The Rule is proposed and remains open for comment. Comments and requests for public hearing remain open until September 24, 2012. Comments must be submitted to:

CC:PA:LPD:PR (REG-130266-11)Room 5203Internal Revenue ServicePO BOX 7604Ben Franklin Station, Washington DC 20044

or electronically via the Federal eRulemaking Portal:http://www.regulations.govIRS REG-130266-11

Host of new acronyms!!

The New Era – Background


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The Patient Protection and Affordable Care Act of 2010 (PPACA) marks the beginning of a new era in the provision of health care services.

Widespread impact Based on the AHA 2010 Hospital survey:

4,985 are Community Hospitals, • 2,904 Nongovernment nonprofit Community Hospitals• 1013 Investor-Owned (For Profit) Community Hospitals• 1,068 State or Local Government Community Hospitals• Hospitals with dual status as government hospitals that are also tax exempt under

Section 501(c)(3) will be required to comply Nonprofit hospitals are subject to new reporting obligations that, if not fulfilled

in a timely manner, can lead to loss of its tax exempt status.

The New Era – Legislative Context


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The New Era – Legislative Context


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IRS Section 501(r) - PPACA


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The Patient Protection and Affordable Care Act of 2010 (PPACA) Section § 9007 The rule is also referred to as ACA

Enacted March 23, 2010 Pub L No 111-148

New Section to the Internal Revenue Service Code, IRS 501(r), imposing additional requirements on hospital organizations to be exempt under IRS 501(c) (3) Financial Assistance Policy – IRC § 501 (r)(4) Emergency Medical Care Policy – IRC § 501 (r)(4) Limitations on Charges - IRC § 501 (r)(5) Billing and Collection Restrictions - IRC § 501 (r)(6)

IRS Section 501(r) – Proposed Requirements


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Charitable Hospitals must Conduct a Community Needs Assessment (CNHA)

Needs will be assessed every three years Implement a strategy to address the identified needs

Limiting charges to those eligible (indigent patients) Maintain Financial Assistance Policy

Implement and widely publicize a written financial assistance policy containing specific elements

Emergency Care Policy Comply with specified billing and collection policies

Requirement to use reasonable efforts to determine eligibility for financial assistance before engaging in extraordinary collection actions

IRS Section 501(r) – Driving Force


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Federal Register, Volume 77, No. 123 26 CFR Part 1 – Additional Requirements of Charitable Hospitals

Proposed Rule June 26, 2012 Part II Pages 38148 - 38169

IRC §§ 501(r) (4), (5) and (6) – imposed by IRC § 501(r) (1)(4) Financial Assistance and Emergency Care Policies(5) Limitation on Charges(6) Billing and Collection Restrictions

ADDITIONAL REQUIREMENTS


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IRC § 501(r)(1) and (2)

IRS Section 501(r) (1) – Purpose and Background


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IRS Section 501(r) (1) imposes four additional requirements described in sections 2, 3, 4, and 5

IRS Section 501(r) (2) provides that the additional requirements apply to: An organization that operates a facility required by a State to be licensed,

registered or similarly recognized as a hospital; and Any other organization that the Secretary determines has the provision of

hospital care as its principal function or purpose constituting the basis for its exemption under Section IRC 501(c) (3).

Applies to hospital organizations on a facility-by-facility basis If a hospital operates more than one hospital facility, the organization is

required to meet the additional requirements of Section 501 (r) with respect to each facility.

COMMUNITY HEALTH NEEDS ASSESSMENT


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IRC § 501(r)(3)

IRS Section 501(r) (3) - CHNA


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Section 501(r) (3) requires a hospital organization to: Conduct a Community Health Needs Assessment (CHNA) every three years, Adopt an implementation strategy to meet the community health needs

identified through such assessment. The CHNA must

Take into account input from persons who represent broad interests of the community the hospital facility serves including those with special knowledge of/or expertise in public health, and

Be made widely available to the public – Section 501(r)(3)(b)

IRS Section 501(r) (3) - Taxation


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Joint Committee on Taxation technical explanation of the Revenue Provisions of the Reconciliation Act of 2010 as amended in combination with PPACA March 21, 2010.

“May be based on current information collected by a public health agency or non-profit organizations and may be conducted together with one or more organizations, including related organizations”

Section 6033(b)(15)(a) requires hospital organizations to include in their annual information return (Form 990) a description of how the organization is addressing the needs identified in each CHNA conducted under Section 501(r)(3) and a description of any needs that are not being addressed, along with the reasons why the needs are not being addressed.

Section 4959 imposes a $50,000 excise tax on a hospital organization that fails to meet the CHNA requirements under this section.

POLICIESFINANCIAL ASSISTANCE

EMERGENCY CARE


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IRC § 501(r)(4)

IRS Section 501(r) (4) – Financial Policies


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Financial Assistance Policy (FAP) The proposed regulations interpret the FAP statutory requirements in detail Hospital policy will need revised to include the statutory requirements

Some of the expectations may be included in current policy IRC 501(r)(4)(A) requires a written FAP that includes:

Financial Assistance eligibility criteria (free or discounted care) The method used to calculate the amount charged to patients Financial Assistance application method Expected hospital action in the event of non-compliance (non-payment)

This may be addressed in a separate policy Measures used to widely publicize the FAP throughout the community the

hospital serves

IRS Section 501(r)(4) – Financial Assistance Policies


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Section 501(r)(4)(B) requires a hospital organization to have a written policy requiring the organization to provide, without discrimination, care for emergency medical conditions (within the meaning of Section 1867 of the Social Security Act (42 USC 1395dd)) to individuals regardless of their eligibility under the FAP.

EMTALADischarge Collection programs and/or processes should be reviewed for

compliance.

LIMITATION ON CHARGES


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IRC § 501(r)(5)

IRS Section 501(r)(5) – Limitation on Charges


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IRS Section 501(r)(5) limits amounts charged for emergency or other medically necessary care that is provided to individuals eligible for assistance under the organizations FAP to not more than amounts generally billed (AGB) to individuals who have insurance covering such care.

This section prohibits the use of gross charges.Proposed Regulations require hospitals to use one of two calculation

methods in determining the AGB: Simple: Prospective Medicare Complex: Look Back Method



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Switching between the two calculation methods is prohibited once a method is adopted by the hospital.

Private health insurance data may not be used in hospital calculation methods

“It is intended that amounts billed to those who qualify for financial assistance may be based on either the best, or an average of the three best, negotiated commercial rates, or Medicare rates.”



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Prospective Medicare Method This calculation is the simpler AGB calculation method for emergency or other medically

necessary care to the FAP eligible patient. This would allow the FAP-eligible patient to be treated as if he or she were a Medicare

Fee For Service (FFS) beneficiary Using typical hospital billing and coding procedures, Medicare medical necessity

software, and other hospital specific tools, the facility could identify the financial responsibility amount the FAP eligible patient would be expected to pay for services (the AGB)



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Look-Back Method Allows hospitals to multiply the gross charges for a particular service by the AGB

percentage. The hospital can include FFS Medicare paid claims and private insured paid claims to

calculate the AGB percentage. Medicare Advantage claims are treated as paid by private insurer claims in this calculation.

The AGB percentage is reached by: Dividing the gross charges for claims considered to have received payment in full submitted to

certain payers classified as emergency and other medically necessary services over the prior 12 months by the amount the hospital received for the same claims (including copayments, coinsurance, and deductibles).



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Look-Back Method AGB percentages can be calculated for different categories and services, or Separate AGB percentages can be calculated for individual items and services as

long as an AGB percentage exists for each emergent and medically necessary service.

AGB percentages must be calculated annually. AGB percentages calculated using the Look-Back method must be applied by the

45th day after the conclusion of the 12 month period used in the calculation.



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Look-Back Method Under the proposed regulations, the hospital may charge FAP-eligible

patients more than the AGB amount for non-emergent care or not medically necessary care;

In all cases, the charge for non-emergent/not medically necessary care to the FAP-eligible patient must be less than the hospital’s gross charges.



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Safe Harbor for Certain Charges in Excess of AGB FAP-eligibility is determined without regard to whether the patient has applied for

assistance under the FAP. A hospital will not violate the charge limitations if it charges more than permitted

to a FAP-eligible that has not submitted a complete application. A safe harbor is imposed.

For protection under Safe Harbor, the hospital must have made, and continue to make “reasonable efforts” to determine whether the patient is FAP-eligible (within the definitions of 501(r)(6)) including correcting the account balance if the individual subsequently is found to be FAP-eligible.

BILLING AND COLLECTION


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IRC § 501(r)(6)

IRS Section 501(r)(6) – Billing and Collections


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IRS Section 501(r)(6) Restrictions: Hospital is required to make “reasonable efforts” to determine FPA-eligible's

before engaging in “extraordinary collection action” (ECA) The proposed regulations provide detailed descriptions of:

The actions defined and/or considered ECA What constitutes “reasonable efforts” Notification requirements, and Special considerations/requirements that apply to incomplete FAP applications



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ECA Any action taken by a hospital (or its agent) related to FAP-eligible covered

care collections requiring legal or judicial intervention without limitation to: Property Lien Foreclosure on real property Attaching or seizing personal property or a bank account Civil action Arrest of the individual for failure to pay Causing an individual to be subject to a writ of body attachment, and Wage garnishment



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ECA includes: Reporting adverse information to consumer credit agencies, and Sale of the debt.

ECA does not include: Referral of debt without sale, Deferring (or denying) care based on a pattern of non-payment, Requiring deposits before providing care, or Charging interest.

Caution – EMTALA restrictions



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Reasonable Efforts Two relevant time periods:

Notification Period begins on the date of care and ends on the 120th day after the hospital provides the individual with the first bill for the care. The hospital must notify the FAP-eligible of the hospital FAP during this period.

Application Period ends on the 240th day after the hospital provides the individual with the first bill for the care. The hospital must accept and process FAP-eligible applications during this

period.



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Notification/Reasonable Efforts A hospital can satisfy “reasonable efforts” notification during the notification

period by: Providing a plain language FAP summary, and offer an FAP application, prior to

discharge, Providing a plain language FAP summary with all (and at least three)

bills/statements. Discussing the FAP in oral communications about the charges, and Provide at least one written notice of the ECA action the hospital may exercise

and the deadline after which the ECA may begin. The deadline may not be earlier than 30 days from the date of notice



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Notification/Reasonable Efforts Upon submission of an FAP Application, the hospital is no longer required to

undertake the notification efforts Similar requirements apply in the event of an incomplete assistance application

Waiver of rights for FAP Application does NOT constitute hospital “permission” to satisfy the notification requirement,

ECA may begin 120 days after the initial bill (but not earlier than 30 days after notice that specifies the ECA’s) if no application is submitted after the hospital has met and documented all notification requirements.


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Application Period The hospital must accept and process FAP applications submitted prior to

the end of the application period (240 days after the initial bill) Even if ECA’s have been engaged

ECA’s must be suspended when an FAP application is received during the 240 day period. ECA’s are suspended pending the hospital’s determination of FAP eligibility.

If/when the individual is determined as FAP eligible, the hospital must reverse any/all ECA’s initiated, even if the actions were compliant when taken.




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Reasonable Efforts – Complete FAP Applications: ECA’s are immediately suspended The hospital is expected to make eligibility decisions in a timely manner. The hospital will provide written notification to the individual of the

determination that includes the basis for the determination. Once a patient is defined as FAP eligible, the hospital must:

Provide a bill that indicates the amount owed and shows or describes how the individual can obtain information regarding the AGB calculation and how the hospital determined the amount owed,

Refund of any excess payments made, and Take all reasonably available efforts to reverse any ECA (with the exception of a

sale of debt) such as, removal of adverse credit reporting, removal of liens or levies.



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Reasonable Efforts - Incomplete Applications Hospitals must manage processing of an incomplete application during the

application period by: Suspension of any ECA’s Provide the applicant written notice describing the deficiency (ies) and any/all

information required to complete the application/ The notice must include a plain language FAP, and

Provide at least one written ECA notice the hospital may initiate or resume if the individual fails to complete the application or pay the amount due by a deadline that is no earlier than the later of: 30 days from the notice date or the last day of the application period.



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FAP - Plain Language Summary Defined as a clear, concise, easy to understand written statement that

providing notification that the hospital offers financial assistance FAP: Brief description of eligibility requirements and assistance offered under the FAP, Direct website address and physical location(s) where the individual can obtain

copies of the FAP and application forms, Instructions to obtain a free copy of the FAP and FAP application by mail, Hospital specific contacts for responses to FAP information, FAP application

process, as well as nonprofit organizations or government agencies capable of assisting,

Available translations, A statement indicating that the FAP-eligible will not be charged more for

emergency or other medically necessary care than the AGB.



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Referring or Sale of DebtIf/when a hospital refers or sells the debt to another party during the application period, the hospital will have made “reasonable efforts” only if it first obtains (and enforces) legally binding written agreement with the other party that adheres to certain requirements. Refrain during the notification period from engaging in ECA’s until the hospital

has made reasonable efforts to determine FAP eligibility. Upon receipt of an application, suspend ECA’s until the hospital has completed

reasonable efforts to determine FAP eligibility.



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Referring or Sale of Debt If the individual submits an FAP application during the application period and

the hospital determines the individual is FAP-eligible,: The party must adhere to procedures specified in the agreement between the

parties that ensure the individual does not pay the party and hospital together more than he or she is required to pay as a FAP-eligible individual, and

Except for the sale of debt, if the party, other than the hospital, has the authority to do so, the party must also take all reasonably available measures to reverse any ECA.

If the party refers or sells the debt to yet another party (agent) during the application period, the party must obtain a written agreement from the other party to abide by the requirements

IRS Section 501(r)


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Your Moderator:Gail Burke The Manchester Group

[email protected]

Panel MembersRusty Ingalls NFV Healthcare Group

[email protected] KellyFCS Services

[email protected] Hall BCA Financial Services

[email protected] Manning Munroe Regional Medical Center

[email protected]

moderator: gail burke – the manchester group panel members: jerry “rusty” ingalls – nfv...

Documents

section irs

r slide

irs reg

r plantation

section 501c3

government hospitals

nonprofit hospitals

r additional slides