On November 19, 2024, Senators Charles Grassley and Elizabeth Warren submitted this linked letter to the Internal Revenue Service (IRS) urging the agency to increase its oversight of nonprofit hospitals and ensure that they are providing benefits to the community, particularly as it applies to financial assistance. With the change in administration and the president-elect’s focus on smaller government, it remains unclear what will become of the federal regulatory environment. However, based on the letter some in Congress will continue to push for increased oversight of tax-exempt hospitals. Although changes to IRS 501(r) have not been announced, we wanted to ensure that you are aware of this communication and its potential impact to your nonprofit hospital.

The letter recommends that the IRS do the following:

• Increase oversight of tax-exempt hospitals to enforce existing requirements and ensure consequences for negligent noncompliance with current requirements.
• Clarify requirements for financial assistance policies, so that patients who qualify for financial assistance under existing hospital policies receive that assistance.
• Prohibit nonprofit hospitals from using aggressive collections practices before comprehensive efforts to determine patient eligibility for financial assistance.
• Issue a new revenue ruling to reinstate the requirement that nonprofit hospitals provide charity care to the extent of their financial ability that was rescinded in 1969.

We recommend that Hospitals act now to ensure that they are compliant with current regulations. There are several ongoing tasks that must be regularly performed to ensure that hospitals stay in compliance with the regulation requirements. Hospitals can inadvertently become non-compliant by failing to monitor and update the key components of 501(r), when necessary.

We suggest that Hospitals review the following considerations for 501(r) compliance:

• Are you understanding and tracking various types of community benefits you are providing on Form 990, Schedule H, to ensure compliance with the requirements of 501(r) and quantify the value of your tax-exempt status
• Is your hospital’s financial assistance policy, billing and collections policy, plain language summary, and financial assistance application published on the hospital’s website?
• Are the policies current and up to date?
• Is the public notified of the hospital’s financial assistance policy within the hospital via signage or brochures in conspicuous locations in accordance with the regulatory requirements?
• Have you calculated the amounts generally billed (AGB) discount percentage for your financial assistance policy for this year? This calculation is required.  Is it included in your financial assistance policy?
• When was the last review or update to your financial assistance policy?
• Does your hospital’s financial assistance policy (or appendix) include a list of providers that are covered and not covered by the policy? Is it current?
• Are you using the current federal poverty guidelines published by the Office of the Assistant Secretary for Planning and Evaluation?
• Are you offering a copy of your hospital’s plain language summary to patients?

Please note that this is not an exhaustive list of all items that must be in place to ensure compliance.

Please contact us via our contact form or by using the information below should you have any questions or need assistance.

Kyle Myers
Senior Manager – Revenue Cycle
kmyers@blueandco.com

Emilie Knieriem
Senior Manager – Tax
eknieriem@blueandco.com