The Issue
The Internal Revenue Service (IRS) has issued guidance for tax-exempt hospitals outlined in the Patient Protection and Affordable Care Act. Section 501(r), added to the tax code by the health care law, imposes four new requirements on hospital organizations that want to qualify for tax exemption under tax code Section 501(c)(3), including:

• Conducting a community needs assessment once every three years
• Publicizing a financial assistance policy
• Prohibiting billing those who qualify for assistance at top rates
• Prohibiting extraordinary collection actions if the hospital has not made reasonable efforts to notify patients of its financial assistance policy
  

In addition, the new law requires the IRS to review the tax-exempt status of each hospital every three years and requires the Treasury and Health and Human Services (HHS) Departments to submit an annual report to Congress on the level of charity care, bad-debt expenses, and the unreimbursed costs of means-tested and non-means tested government programs. The Treasury and HHS Departments are also required to provide a report to Congress in five years detailing trends from the annual reports.