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Insight Health Care Reform and Idaho’s Non-Profit Hospitals

By Thomas J. Mortell,

The Patient Protection and Affordable Care Act (“PPACA”) contains important new provisions for non-profit hospitals recognized as tax exempt under Section 501(c)(3) of the Internal Revenue Code. Under health care reform, Idaho’s tax exempt hospitals will now be required to enact and implement policies which: (1) describe and publicize the hospital’s financial assistance policy; (2) limit the amounts hospitals may charge to those receiving financial assistance; (3) limit the hospital’s collection efforts in certain circumstances; and (4) require the hospital to conduct a community needs assessment every three years.[1]

  1. Financial Assistance Policy. PPACA requires that tax exempt hospitals adopt, implement and widely publicize a written financial assistance policy. The policy must indicate the eligibility criteria for the patient to receive financial assistance and whether the assistance may include free or discounted care. In addition, the policy must include the basis for calculating amounts charged to patients under the policy, the process for applying for financial assistance and, in the case of organizations who do not have separate billing and collections policies, the actions that the hospital may take if the patient does not pay. Hospitals must also adopt a written policy requiring the hospital to provide, without discrimination, emergency medical care to individuals regardless of their ability to pay.
  2. Limitations on Charges. Tax exempt hospitals must now charge patients who are eligible for financial assistance the same amounts billed to patients who have insurance which covering the care provided by the hospital. The hospital may not use gross charges when billing individuals who quality for financial assistance.
  3. Billing and Collection Practices. Under PPACA, tax exempt hospitals must refrain from extraordinary collection actions, even if otherwise permitted by law, against an individual without first making reasonable efforts to determine whether the person is eligible for financial assistance under the hospital’s financial assistance policy.
  4. Community Needs Assessment. Tax exempt hospitals must now conduct a community needs assessment at least every three taxable years and implement a strategy to meet the community needs identified in the assessment. The community needs assessment must take into account input from a broad representation of the interests of the community served by the hospital, including those with knowledge or expertise in public health. The results of the community needs assessment must be made widely available to the public. The failure to conduct a community health needs assessment can result in an excise tax penalty of $50,000.[2]
  5. Implementation. PPACA’s new requirements relating to financial assistance policies, limitation on charges and billing, and collection practices are effective for taxable years beginning after March 23, 2010. The requirement for a community needs analysis is effective for taxable years beginning after March 23, 2012.
  6. Conclusion. Idaho’s hospitals which are recognized as tax exempt under Section 501(c)(3) of the Internal Revenue Code, and those considering tax exempt status under that Section, should be aware of and in the process of implementing the changes required by PPACA. In addition, tax exempt hospitals with 150 or more patient beds should also consider the requirements of Idaho Code § 63-602D(7) when preparing their community needs report.

For assistance in complying with any of these requirements, or for questions in general, please contact Thomas J. Mortell or another member of our Health Law Group at 208.344.6000.

[1] See Section 501(r) of the Internal Revenue Code found at 42 U.S.C. § 501(r).

[2] Under current Idaho law, to maintain a property tax exemption, tax exempt hospitals having 150 or more patient beds must prepare a “community benefits report” to be filed with the County’s board of equalization each year. Idaho Code § 63-602D(7). According to the statute, the report “shall itemize the hospital’s amount of unreimbursed services for the prior year (including charity care, bad debt, and underreimbursed care covered through government programs); special services and programs the hospital provides below its actual cost; donated time, funds, subsidies and in-kind services; additions to capital such as physical plant and equipment.” Id. In addition, the community benefits report, should indicate “the process the hospital has used to determine general community needs which coincide with the hospital’s mission.” Id. Similar to the report now required of all tax exempt hospitals under PPACA, the report required under Section 63-602D(7) shall be provided as a matter of community information. Id.

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