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IRS Finalizes Rule on Community Health Needs Assessment

The Internal Revenue Service (IRS) and U.S. Department of the Treasury issued Dec. 31, 2014, a final rule that provides guidance regarding charitable hospital requirements under the Affordable Care Act. This rule finalizes proposed and temporary regulations the agencies issued in 2012 and 2013.

Specifically, the rule finalizes guidance regarding the required community health needs assessment (CHNA) charitable hospitals must conduct every three years along with an implementation strategy. The final rule details the consequences of noncompliance with the CHNA requirement, including a $50,000 excise tax on a hospital that fails to conduct an assessment in any three-year period. The IRS also reserves the right to revoke a hospital’s 501(c)(3) status after considering all facts and circumstances. In such cases, income derived from the noncompliant hospital facility will be subject to tax. If a hospital facility’s failure to meet the requirements is neither willful nor egregious and the hospital facility corrects and discloses its failure in accordance with IRS guidance, the IRS may excuse the failure.

Charitable hospitals that are also government hospital organizations and are excused from filing a form 990 must comply with all requirements that do not involve disclosure on or with the form 990. This includes making their CHNA implementation strategies and financial assistance policies available to the public online.  

The rule also finalizes regulations regarding charitable hospitals’ obligations as they relate to financial assistance policies, charge practices, and billing and collection efforts. The rule requires charitable hospitals to limit the charges to uninsured patients and patients receiving financial assistance to the general rates for private insurance coverage, Medicare, and Medicaid. Further, hospitals must create and make public the criteria for applying for and receiving financial assistance and must create a written policy regarding the care of emergency medical conditions. Charitable hospitals also must investigate whether an individual is eligible for financial assistance prior to any extraordinary collection efforts.

For questions, please contact Xiaoyi Huang, director of policy, at xhuang@essentialhospitals.org or 202.585.0127.

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About the Author

Gontscharow is a senior policy analyst for America's Essential Hospitals.