The I.R.S. and the Department of the Treasury issued final regulations on December 29, 2014, which clarify obligations of nonprofit hospitals. See 79 FR 250 pp. 78954-79016, “Additional Requirements for Charitable Hospitals; Community Health Needs Assessments for Charitable Hospitals; Requirement of a Section 4959 Excise Tax Return and Time for Filing the Return;” http://www.gpo.gov/fdsys/pkg/FR-2014-12-31/pdf/2014-30525.pdf. Previously, hospitals and consumers were relying on proposed regulations (77 FR 38148), which established charitable hospital duties pursuant to the Affordable Care Act (ACA) and corresponding compliance duties under Sections 501(r)(4) through 501(r)(6) of the Internal Revenue Code.
These final regulations contain some new provisions and revise certain draft provisions, which are effective for the tax reporting season beginning January 2016. Moreover, many meaningful standards of the proposed regulations continue to remain in effect and are binding on nonprofit hospitals. This blog entry examines consumer protections and measures to safeguard patients from medical debt: ACA compliance standards require nonprofit hospitals to implement financial assistance policies (FAPs) for low and moderate income patients, to restrain hospital costs and charges to those patients eligible for FAP (FAP-eligibles), and to restrict billing and collection practices by charitable hospitals and/or their third party vendors and agents. [This blog entry does not address the hospital’s duties with respect conducting community health needs assessments, which are additional critical compliance standards imposed on charitable hospitals under the Section 501(r). Nor does this blog directly address billing and collecting against FAP-eligibles.].
Transparency of Providers Rendering Services in the Hospital Setting
All consumers may invoke the ACA’s newly imposed duties on nonprofit hospitals with respect to increased transparency and consumer protections to demand hospital disclosure and assistance with medical debt. In the hospital setting, for example patients who experience emergency conditions and obtain all treatment at an in-network hospital may nonetheless receive surprise medical bills. Some states, such as New York, responded by enacting state laws to obligate payers -- the insurance carriers – to cover the cost of services even if the patient received out-of-network services. Other states, such as the Commonwealth of Massachusetts, rely on existing state law and regulations, including our Consumer Protection Statute, to hold charitable hospitals accountable for noncompliance. In addition, nonprofit hospitals may be subjected to significant tax penalties or even loss of tax exempt status for failure to comply with Section 501(r)’s newly imposed duties.
Hospital patients, particularly in the emergency room context, often unknowingly access providers or receive services in the hospital setting which are out of network and thus may not be covered by their insurance. Low and moderate income patients, therefore, can expect FAPs, under Section 501(r)(4), to serve as a means of ameliorating some medical debt by imposing disclosure requirements, limiting charges, restricting billing and collection efforts, and affirmatively assisting patients in enroll in applicable public healthcare programs. Specifically, qualifying patients, e.g. FAP-eligibles, should experience increased consumer protections because nonprofit hospitals must now disclose in their FAPs which providers offer services in the hospital setting but are actually outside the scope of the FAP, such as private physicians’ organizations. Disclosing not only whether their treating physicians are FAP-protected but also what hospital diagnostic tests and related medical care is independently billed and not subjected to the FAP would Hospitals would be further benefited in timely reimbursements and payments from insurance by. Although FAPs must disclose the entirety of providers offering services at the hospital and which of those providers are covered (or not) by the FAP, consumers are still at risk for auxiliary services rendered in the hospital setting.
FAP Eligibility Criteria and Basis for Calculating Amounts Charged to Patients
A FAP must be responsive to patients and community needs, including language accessibility. Section 501(r)(4)(A)(i)-(ii). FAPs must identify the eligibility criteria, the kinds of financial assistance available, such as free or discounted care, and the method by which the hospital calculates the amounts charged to FAP-eligibles. Despite this, FAP eligibility criteria remain undefined and must be determined in accordance with state law and regulations governing charitable hospitals so long as such provisions do not conflict with the final regulations. In the Commonwealth, for instance, some consumer protections and hospital duties are encompassed in Health Safety Net Eligible Services, 101 CMR 613.00. However, unlike the Health Safety Net regulations, which specify and provide uniformity regarding applicable timeframes, charitable hospitals may define their own parameters during which patients are evaluated for and/or determined FAP-eligibles.
The final regulations clarify that hospitals may expand the income eligibility and breadth of financial assistance programs offered above and beyond the ACA minimum requirements. In doing so, hospitals can offer discounts from charges to any patients. However, with respect to FAP-eligibles, no nonprofit hospital can charge a FAP-eligible more than amounts generally billed (AGB) to individuals who have insurance. See 501(r)(5)(A). Hospitals have discretion in selecting the methodology for computing AGB and can change the methodology so long as the hospital updates its FAP in accordance with AGB amendments. As a result, the final regulations confirm that hospitals can implement
(i) The look-back method –A hospital multiplies its gross charges by one or more AGB percentages, which annually divide the sum of certain claims for emergency and medically necessary services by the sum of associated gross charges. Hospitals have the discretion to apply the look-back method to AGB for all emergency and other medically necessary services, or, to calculate multiple AGB percentages for different kinds of services. AGB includes amounts that hospitals will be reimbursed by insurers, together with amounts that are a patient’s responsibility, such as co-payments, deductibles or co-insurance.
(ii) The prospective method -- A hospital uses billing and coding procedures in place for Medicare fee-for-service patients, or for Medicaid (MassHealth) or both, together with payments that a public program patient would be expected to pay for the medical services, such as co-insurance.
Regardless of the AGB methodology selected by a hospital. AGB is not a mirror image of privately negotiated commercial insurance rates paid to hospitals. Because many consumers are faced with unaffordable cost sharing and deductibles, they will – like their uninsured counterparts – benefit from the ACA’s imposition of Section 501(r)’s FAP responsibilities on nonprofit hospitals.
A Hospital Must Widely Publicize its FAP
Significant outreach to communities and patients regarding the hospital’s FAP is required. A hospital must make FAP documents web-accessible, with timely updates, and available in hard copies upon request by a patient. See Section 501(r)(4)(A)(v)). While this duty to publish a hospital FAP may seem trivial initially, in light of the frequent scenarios of hospital patients receiving surprise and unexpected medical bills, this duty is useful to consumers who may be better informed before entering the hospital. In addition, a hospital must make available to patients a plain language summary of the FAP during intake, discharge, and billing process. Furthermore, the final regulations require a conspicuous written notice concerning the hospital FAP on all patient billing. Like FAPs, these notices must be designed to reach five (5) percent of the community serviced by the hospital or 1,000 individuals, whichever is less. See EOHHS Limited English Proficient (LEP) Guidance, 68 Fed. Reg. at 47,314 (stating that recipients of federal financial assistance should consider their actual experiences with limited English proficient patients and the demographics date on languages spoken in the community served in an attempt to balance meaningful access by LEP patients to critical services without undue burdens imposed on nonprofits.).
Often consumers receive bills that purport to offer a telephone number for a hospital resource; however, these phone lines may be outsourced or handled by hospital staff in need of training and education. The ACA holds hospitals responsible for the responsiveness of any third party agency and hospital staff to provide meaningful contact numbers in all bills to patients regarding the FAP, the hospital website, and the hospital location where patients can obtain FAP documents. Additionally, the requisite FAP summary must contain resources for patient assistance including the hospital location and phone number, or, a nonprofit organization or government agency which could render consumer assistance.
Lorianne M. Sainsbury-Wong
M.B.A. Health Law Section, Chair
Litigation Director & Compliance Attorney
healthlawadvocates
One Federal Street
Boston, MA 02110
617-275-2987 (ph.)
617-338-5242 (fax)
sainsbury_wong@hla-inc.org
www.healthlawadvocates.org