Most 501(c)(3) hospitals tackled the requirements of Internal Revenue Code (IRC) Section 501(r) when the final regulations were released years ago. Tax-exempt hospitals across the U.S. updated their policies and procedures to comply with the regulations. This was a significant first step, but there are ongoing items that should be regularly monitored to stay in compliance with the law. Without this monitoring, hospitals can inadvertently fall out of compliance.
Here are some easy items to check to see if your hospital is still in compliance:
- Can you find your hospital’s policies on the website? Are they easy to find and named appropriately? These documents include the English and translated versions (if applicable) of the plain language summary, financial assistance policy (FAP), financial assistance application, and the most recent two Community Health Needs Assessments (CHNAs). Do the links work when clicked? Are the policies the most up-to-date versions?
- If your hospital uses the look-back method to calculate the amounts generally billed (AGB), what is the most recent percentage on your website? Is it within the last year?
- Is the CHNA completed timely each third year? Is the hospital documenting the board’s approval of the policy and posting it on the hospital’s website before the last day of the tax year?
- Does the FAP or an appendix to the FAP include a provider list that includes both covered and non-covered providers? Is it updated regularly and available on the hospital’s website?
These are a few areas where hospitals can lose sight, causing them to fall out of compliance. As a reminder, the IRS is doing stealth reviews of all 501(c)(3) hospitals’ websites once every three years to check for compliance. We also continue to see hospitals audited for 501(r) compliance by the IRS.
One recent development in the industry is a renewed focus on community benefit by Congress, the media, and other stakeholders. Several senators recently wrote the IRS and the Treasury Inspector General for Tax Administration inquiring about the effectiveness of IRS enforcement efforts related to the community benefit standard and IRC §501(r). Other reports have compared the value of tax exemption to the amount of community benefit provided, suggested minimum charity care standards, recommended additional restrictions on extraordinary collections actions, scrutinized executive compensation, and called for enhancements on Schedule H of Form 990. With these recent developments, it is more important than ever for hospitals to be aware of their community benefit percentage and how those amounts are calculated. When was the last time the hospital evaluated its community benefit calculation to ensure it included everything? How does the hospital stack up against others in its state or against other hospitals of a similar size and payor mix? How does the hospital’s community benefit compare to the value of its tax exemption?
If your hospital has questions on §501(r) compliance, community benefit, or benchmarking your hospital’s Schedule H data, please reach out to your professional at FORVIS.