There is much confusion in the industry about the status of the IRS 501r regulations for 501c3 charitable hospitals. While the regulations from the IRS have not been finalized, the creation of 501r and its four requirements are currently law, and have been since the signing of PPACA in 2010. At this time, until the regulations are finalized, hospitals are subject to a Good Faith interpretation of the Law. While there exists much confusion regarding the proposed regulations issued in June, there are core requirements of the provision that are not likely to change much when the regulations do become final.
In anticipation of the regulations becoming finalized in the next year, it is suggested that Hospitals should begin to take the following actions to substantially implement these regulations now, and therefore, also bring themselves into good faith compliance with the law. If a hospital begins work now, when the regulations become finalized, hopefully only tweaking of finalized details will need to be done.
1. Update your Financial Assistance Policy and start taking actions to make is widely available and publicized. 501r is very specific regarding what needs to be in the policy and how it must be distributed. Work on your plain language summary, your translations, and access to the policy on your website. Order signage for the main hospital waiting areas, etc.
2. Start Looking at Limitations on Charges and what method will best serve your organization. Do not wait to the 11th hour to decide which computation method you want to use. Currently there are two available, the look back method and the prospective Medicare method. While we are hopeful that the IRS will respond to comments, by allowing additional methods, you should assume that they might not and be ready to decide which method makes the most sense for your organization. Perhaps run some modeling on how you would determine the Amounts Generally Billed Percentage.
3. Consider how the Notification and Applications period will affect your AR and the flow of accounts on the back-end. Will you keep accounts in house longer? How will you track the periods to make sure you are in compliance? Will you change how you out-source accounts? Again, we are hopeful that the IRS will change these and lessen the 240 day application period, but if they do not, you organization will need to be ready to respond.
For additional information on the 501r proposed regulations, see https://www.federalregister.gov/articles/2012/06/26/2012-15537/additional-requirements-for-charitable-hospitals