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IRS Final Rule regulations affect tax-exempt hospitals

June 17, 2015

Now is the time to prepare for the Internal Revenue Service (IRS) Final Rule regulations for tax-exempt hospitals. The Patient Protection and Affordable Care Act (PPACA) requires every nonprofit hospital to widely publicize its financial assistance policy (FAP).1 The FAP must include a list of every provider that delivers emergency or other medically necessary care in the hospital and specify which of these providers are covered by the hospital’s FAP.2 Failure to comply with this requirement can result in the revocation of tax-exempt status under section 501(c)(3) of the IRS.

While this provision was included in the final regulations, it was not included in the proposed regulations or subject to requests for comment. Albeit significant and potentially arduous, this requirement complements the four components necessary to adhere to the PPACA.3 These components are as follows:

  1. Establish and disclose a financial assistance policy.
  2. Conduct consistent billing rates for individuals eligible for financial assistance, Medicare patients or private commercial insurance patients.
  3. Observe fair billing and debt collection practices.
  4. Conduct a community needs assessments at least once every three years.

This regulation will apply to taxable years beginning after December 29, 2015. For more on the Final Rule, please contact a member of Godfrey & Kahn’s Tax and Employee Benefits Practice Group or  a member of Godfrey & Kahn’s Health Care Practice Group.

1 PPACA § 9007
2 79 Fed. Reg. 78956, 79005
3 Id.

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