The Internal Revenue Service (IRS) on Monday released new regulations on how non-profit hospitals collect sums owed by patients.
The intent of the regulations is to prod hospitals to behave in a more transparent manner with patients and give them an opportunity to apply for financial assistance.
The rules bar hospitals from seeking payments from patients in their treatment rooms, or selling their debt to collections agencies without making a "reasonable effort" to offer financial assistance first.
Hospitals will also be limited from billing patients without insurance who are eligible for financial assistance any more than what they charge insured patients. They must also widely publicize their financial eligibility guidelines and clearly communicate them to patients.
Although the changes are part of the Affordable Care Act, they come at a time when more not-for-profit hospitals come under fire for their debt collections practices. Particularly striking examples of aggressiveness in this area come from Mosaic Life Care in Missouri, Carolinas Health in South Carolina and Fairview Health Services in Minnesota.
Moreover, every three years hospitals will have to conduct a healthcare needs assessment, and report the steps they take to address the needs in their 990 tax returns.
If hospitals don't conduct the assessment, they could be subject to an excise tax. If they do not abide by the financial assistance rules, they could have their tax status revoked.
"As a condition of their tax-exempt status, charitable hospitals must take an active role in improving the health of the communities they serve, establish billing and collections protections for patients eligible for financial assistance, and provide patients with the information needed to apply for such assistance," the IRS said in an introduction to the regulations.