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Amie Whittington

Health Care

The IRS Isn’t the Only One Monitoring Your Exempt Hospital

Southern Poverty Law Center is scrutinizing potential failures

Published: Tuesday, August 22, 2017 - 12:01

As discussed in my previous article, the Internal Revenue Service (IRS) is ramping up compliance audits of governmental hospitals that are exempt under section 501(c)3. However, the IRS isn’t the only one monitoring your tax-exempt hospital. Other organizations have started policing these requirements.

As a refresher, at the end of 2014, the IRS released the final regulations under section 501(r) for charitable hospitals exempt under section 501(c)3. These regulations are in response to requirements enacted under the Patient Protection and Affordable Care Act, and they finalize regulations first proposed in June 2012 to hold tax-exempt hospitals to a higher standard. 

The final regulations discussed requirements for what must be included in the written financial assistance policies, along with information detailing requirements for:
• Amounts generally billed
• Limitations on charges
• Extraordinary collection actions
• Community health needs assessments

At the time regulations were issued, many wondered how the IRS would ensure tax-exempt hospitals were following all of these new requirements. In time, the IRS updated Schedule H of Form 990 to include general questions regarding these requirements. The form instructs hospitals to include website links for financial assistance policies and community health needs assessments.

However, the IRS isn’t the only one looking at your policies for compliance under 501(r). Specifically, the Southern Poverty Law Center has started issuing letters to tax-exempt hospitals detailing their potential failures under 501(r). In particular, the Southern Poverty Law Center is closely examining tax-exempt hospitals’ financial assistance policies, for example, to:
• Ensure financial assistance policies are being made widely available to the public, including the plain language summary
• Make sure that the policies are available in other languages if the area has a certain number of non-English-speaking residents
• Verify that the financial assistance policies include the basis for calculating the amounts actually charged or billed to patients
• Confirm that the policies list any extraordinary collection actions that the hospital may take against patients.

These letters from the Southern Poverty Law Center ask that the hospitals return proof of correction to them within a short time frame. If a hospital does not respond to them in a timely fashion, they will file a formal complaint against the hospital to the IRS. And trust me, you don’t want to be put on the IRS’s noncompliance “radar,” as this significantly increase your chances of an IRS audit.

Contact Horne for help in examining your financial assistance policies and ensuring compliance under 501(r).


About The Author

Amie Whittington’s picture

Amie Whittington

Amie Whittington is a senior manager in HORNE LLP’s healthcare services practice. She primarily provides tax and consulting services to nonprofit and healthcare entities, including hospitals, doctor groups, and physicians.