Tax

The Clock is Ticking for 501(r) Compliance

2015
Author:  Brian Todd

Brian Todd

Partner

Tax

Health Care

910 E. St. Louis Street, Suite 200
P.O. Box 1190
Springfield, MO 65801-1190 (65806)

Springfield
417.865.8701

When they were issued, the final Internal Revenue Code (IRC) Section 501(r) regulations seemed rather generous in the amount of time provided for tax-exempt hospitals to revise their policies and procedures to achieve compliance. However, much of that transition time has passed, and many tax-exempt hospitals are approaching the compliance deadline.

Background

On December 29, 2014, the final 501(r) regulations were issued. Tax-exempt hospitals must comply with the final regulations on the first day of the tax year beginning on or after December 29, 2015. Therefore, calendar year-end tax-exempt hospitals must be in compliance on January 1, 2016. Tax-exempt hospitals with a different fiscal year-end must comply by the first day of the fiscal year beginning in 2016.

Here are the four significant areas under 501(r):

  • 501(r)(3) – Community health needs assessment (CHNA)
  • 501(r)(4) – Financial assistance policy and emergency medical care policy
  • 501(r)(5) – Limitations on charges for financial assistance eligible patients
  • 501(r)(6) – Billing and collections requirement

The due dates discussed above apply to the last three of the four significant areas. The CHNA, however, is due three tax years after completion of the initial CHNA. For example, a tax-exempt hospital with a September year-end likely completed its initial CHNA during the September 30, 2013, fiscal year, so its second CHNA will be due by the end of the September 30, 2016, fiscal year.

Important Considerations

Timing is everything when attempting to comply with these regulations. Many areas require final approval by an authorized body, defined in the regulations as the governing body or a committee, or another party authorized by the governing body to the extent permitted under state law. Board meeting agendas fill up quickly, so it’s important to schedule 501(r) discussions to ensure proper approval is obtained.

An authorized body also must approve the financial assistance policy, emergency medical care policy and billing and collections policy. As discussed above, the first tax-exempt hospitals that must have the necessary policy revisions completed are calendar year-end hospitals that need approval from an authorized body by January 1, 2016. Every tax-exempt hospital likely will be required to make some changes to comply with the final regulations. If your hospital has not yet formed a compliance team—which could include internal and external resources—to evaluate your current policies and procedures, the time is now.

More Information

BKD’s thought leaders have put together numerous articles and webinars on IRC Section 501(r):

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Articles



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