AHA: New tax-exempt rules too taxing for hospitals

Hospitals should have the flexibility to meet new tax-exempt rules, rather than following prescribed uniform regulations, the American Hospital Association (AHA) told the Department of the Treasury and Internal Revenue Service yesterday.

"[T]he proposed regulations consist of extremely detailed and prescriptive requirements that deprive hospitals of the flexibility to use the most efficient and effective means to meet the requirements …" AHA Senior Vice President and General Counsel Melinda Hatton wrote.

Although AHA, which represents 5,000 hospitals, said it supports the Internal Revenue Code, Section 501(r), the tax-exempt rules for charitable hospitals are too burdensome, the association suggested. For instance, the provisions under health reform require that hospitals must implement a financial assistance policy (FAP), limit charges to patients who are eligible for assistance under the hospital's FAP, and refrain from taking certain collection actions before assessing the patient's financial assistance status.

Hospitals would generally presume that every patient is eligible for financial assistance until proven otherwise through the FAP application, which AHA called unnecessarily time-consuming and costly because hospitals already have a registration process that identifies whether a person needs financial assistance. AHA therefore urged the Treasury Department and IRS to revise the definition of an FAP-eligible individual.

In addition, AHA called for more guidance on the consequences if hospitals fail to comply.

AHA further urged that the provisions take effect no sooner than Jan. 1, 2014, to accommodate for hospitals' efforts on Medicaid expansion and health insurance exchanges under the Affordable Care Act, which will influence their assistance programs, it said.

For more information:
- see the AHA letter (.pdf)
- read the AHA News Now brief

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