Health Law (HL)

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Not-for-profit hospitals | Compliance with federal and state laws

By Lorianne Maria Sainsbury-Wong posted Thu April 23,2015 07:59 PM


Not-for-profit hospitals are now implementing compliance standards to meet new obligations as § 501(c)(3) charitable organizations and to effectuate in-house (and certain downstream) protocol to safeguard their tax-exempt status.  I was pleased to address medical and legal practitioners who attended the Massachusetts Bar Association’s Health Law Section program at the University of Massachusetts Medical School in Worcester, MA. [].  I examined the final regulations under §§ 501(r)(4)-(6) of the Internal Revenue Code, pursuant to  consumer protections and transparency requirements under the Affordable Care Act. 

The recently released regulations impose significant billing and collection duties on not-for-profit hospitals with respect to medical services and community benefits provided to patients, including to (i) disclose financial assistance policies (FAP) for low and moderate income patients who may be eligible for public healthcare coverage and/or who are unable to pay out-of-pocket for services received; (ii) identify how charitable hospitals calculate limitations on gross charges for emergency and other medically necessary care rendered to FAP-eligibles; and (iii) define and restrict extraordinary collection actions (ECAs) undertaken against FAP-eligibles. 

Specifically, the final regulations mandate that charitable hospitals must disclose which providers and services are FAP-protected, thereby reducing consumer confusion with respect to emergency room services, for example, wherein private physicians, anesthesiologists, and other caregivers may bill separately from the charitable organization despite providing services in the hospital setting.  In addition, there can be no charge master rates or gross charges assessed to FAP-eligibles, and the amounts charged must be reduced to those amounts generally billed. Moreover, the 120/240 day rules under § 501(r)(6) prohibit ECAs against a debtor whose FAP-eligibility has not been determined until 120 days after the first bill -  and for another 120 days thereafter, a charitable hospital must cease and desist all ECAs upon receipt of a FAP request until the hospital reasonably assesses FAP-eligibility.   

A more detailed summary of the final federal regulations and their interaction with laws governing the Commonwealth’s not-for-profit hospitals can be found here: 

Lorianne M Sainsbury-Wong
MBA Health Law Section, Chair