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Tax-Exempt Hospitals Face Additional Requirements Under Health Care Reform Law

September 20, 2010

The Patient Protection and Affordable Care Act (PPACA), as enacted March 23, 2010, includes certain provisions that affect tax-exempt hospitals.  It is essential that these hospitals be in compliance with each of these provisions, and that they are comfortable in their level of familiarity with them.

Here are some highlights of the PPACA as it pertains to tax-exempt hospitals:

  1. Perform a Community Needs Health Assessment (effective after 3/23/12) – This assessment should analyze the health needs of the community by obtaining input from the individuals served by the hospital.  This health assessment will be required to be updated every three years and must adopt an implementation strategy to meet the needs which are identified in the assessment.  Hospitals will be required to provide updates to this process in their annual 990 filing, and the act provides that an excise tax of $50,000 will be imposed on hospitals that do not meet these requirements.
  2. Establish a Financial Assistance Policy (effective 3/31/10) – This policy will require hospitals to develop a written financial assistance policy that includes the following: 

    • Eligibility criteria for financial assistance, and whether such assistance includes free or discounted care;
    • The basis for calculating amounts charged to patients;
    • The method for applying financial assistance;
    • An explanation of collection actions, including the use of collection agencies; and,
    • The method of publicizing the policy to the community.

    Additionally, the hospital will need to have a written policy requiring the organization to provide, without discrimination, care for emergency medical conditions, regardless of the individual's eligibility under the financial assistance policy.
  3. Limitation on Charges (effective 3/31/10) – This will require hospitals to limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the organization's financial assistance policy. The PPACA states that these patients cannot be billed any more than the amounts generally billed to individuals who have insurance covering such care.
  4. Billing and Collections (effective 3/31/10) – Before taking extraordinary collection measures against patients who owe them money – such as lawsuits, liens, attachments or arrests – the hospital must now first make a reasonable effort to determine if the individual is eligible for financial assistance under the hospital's financial assistance policy.

While many hospitals may already have policies in place to deal with financial assistance and billing and collections, now would be a good time to review those policies to determine if they need updating to meet the requirements of PPACA.  Failure to be in full compliance could mean significant problems for tax-exempt hospitals in the near future.

George W. Thomas, CPA, is a Director at BlumShapiro, specializing in hospitals and long-term care.  BlumShapiro is New England's largest regional accounting, tax and business consulting firm based in Connecticut with offices in West Hartford, Shelton, Westport and Waterbury.  The firm serves as business advisors for today's leading middle market companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization's full potential.  For more information about BlumShapiro, visit


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