United States

TE and GE work plan is turning up the heat on 501(c)(3) hospitals

INSIGHT ARTICLE  | 

Is your hospital compliant with Patient Protection and ACA under IRC section 501(r)?

Once every three years the IRS is statutorily required to do a desk review of the Form 990, Schedule H for every hospital information return [every state registered or licensed 501(c)(3) hospital is subject to IRC 501(r)]. There are approximately 3,000 charitable hospitals, the IRS reviews one third of the population annually. The IRS has completed 2,482 compliance reviews for the three periods that include 2014, 2015 and 2016. In these reviews, the IRS analyzes information returns, hospital websites and other information designed to identify the hospitals with the highest likelihood of noncompliance with the new financial assistance policy requirements.

The IRS continues to review hospitals for compliance with IRC section 501(r). As of June 30, 2016, they had completed 692 of the reviews and referred 166 hospitals for field examination. Issues for which referrals were made are:

  • Lack of a community health needs assessment (CHNA) under IRC 501(r)(3)
  • No financial assistance or emergency medical care policies under IRC 501(r)(4)
  • Billing and collection requirements under IRC 501(r)(6)

That is no small percentage of hospitals selected for field examination. Just under a quarter of all hospitals where the IRS completed a desk review were selected.

Here is a sample of an information document request from the IRS:

The information requested will be used to determine if the organization is in compliance with IRC 501(r)(4)(A) which requires a hospital organization to establish a written financial assistance policy (FAP) including certain information.

I. Please provide a copy of the written FAP for the hospital facility identified on Schedule H, within Part V section A that was in place during the tax year.

II. With respect to the FAP provided in response to item I, please provide the following:

a. Provide a sample application and instructions for applying for financial assistance.
b. Provide the basis for calculating the amounts charged to patients under the FAP.
c. Provide written documentation supporting what actions the hospital organization may take in the event of nonpayment.
d. Provide committee minutes describing the hospital organization's actions in regard to widely publicizing the FAP as well as documentation supporting the publicity and plain language summary of the hospital's FAP.
e. Describe how the hospital notifies and informs patients of the availability of the FAP.
f. Provide a copy of a representative billing statement provided to a patient after discharge with all patient-identifying information redacted.
g. Provide a copy of any translated FAP documents, including the FAP, the FAP application form and the plain language summary of the FAP. Also, describe the methodology used to ensure that any limited English proficiency (LEP) populations served by the hospital organization have access to these translated documents.
h. Please make available for interview a person with knowledge of the hospital organization's billing and collection policies.
i. Provide copies of any complaints, including legal complaints, in which a patient alleged that the hospital facility either failed to comply with its FAP or did not comply with the requirements of lRC 501(r)(4)(A) during the current audit period and prior two-year periods.
j. Please make arrangements for an on-site tour of all signage and publications that are present in all hospital facilities regarding the FAP.

III. We would like to take a tour of the center during the examination.

How can we help you?

To discuss how our team can help your business, contact us by phone 800.274.3978 or


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