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IRS Releases 2016 Form 990, Schedule H

IRS Releases 2016 Form 990, Schedule H

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The Internal Revenue Service (“IRS”) recently released the 2016 version of Form 990, Schedule H, Hospitals. 

The 2016 version includes significant changes with respect to community health needs assessments, implementation strategies, billing, collections and financial assistance as a result of the release of the Internal Revenue Code (“IRC”) §501(r) final regulations. More specifically, the 2016 Schedule H expands the reporting requirements for hospital facilities which are now required to report on compliance with IRC §501(r).

Background

The Affordable Care Act (“ACA”), signed into law by President Obama on March 23, 2010, introduced IRC §501(r) which includes four new requirements that tax-exempt hospital facilities are required to comply with related to a tax-exempt hospital facility’s:
  • Community Health Needs Assessment (IRC §501(r)(3));
  • Financial Assistance Policy (IRC §501(r)(4));
  • Limitation on amounts charged, to individuals eligible under the organization’s financial assistance policy, for emergency or other medically necessary care (IRC §501(r)(5)); and
  • Billing and collection practices (IRC §501(r)(6)).

Tax-exempt hospital facilities were required to be compliant with the community health need assessment for taxable years beginning after March 23, 2012. The final regulations under IRC §501(r) apply to tax-exempt hospital facility’s taxable years beginning after December 29, 2015. All tax-exempt hospital facilities were given at least one year to become fully compliant with the final regulations with regards to IRC §501(r)(4), IRC §501(r)(5) and IRC §501(r)(6).

For example:

  • Tax-exempt hospital facilities with a December 31st calendar year-end had until January 1, 2016 to be fully compliant;
  • Tax-exempt hospital facilities with a June 30th fiscal year-end had until July 1, 2016; and
  • Tax-exempt hospital facilities with a September 30th fiscal year-end had until October 1, 2016.

2016 Schedule H

IRC §501(r)(3) requires a tax-exempt hospital facility to conduct a community health needs assessment (“CHNA”) once every three years and to adopt a written implementation plan/strategy addressing the significant needs identified in the CHNA.  The IRS revised Schedule H, Part V, Line 3i to allow a hospital facility to describe the impact of any actions taken to address the significant health needs identified in the hospital facility’s prior CHNA.  Previously, Line 3i allowed a hospital facility to describe whether or not there were any information gaps that limited the hospital facility’s ability to assess the community’s health needs.

IRC §501(r)(4) requires tax-exempt hospital facilities to widely publicize their Financial Assistance Policy (“FAP”) within the community served. The IRS revised Part V, Section B, Line 16 to simply ask if the tax-exempt hospital facility widely publicized its FAP in the community served by the hospital facility.  Formerly, the question asked if the hospital facility included measures to publicize the FAP in the community served.

The IRS further revised Part V, Section B, Line 16 to allow tax-exempt hospital facilities to indicate how their FAP was widely publicized during the tax year. In doing so, the IRS added a new checkbox on Part V, Section B, Line 16g to indicate whether or not the tax-exempt hospital facility notified individuals about the FAP by being offered a paper copy of the plain language summary of the FAP (“PLS”), by receiving a conspicuous written notice about the FAP on their billing statements, and via conspicuous public displays or other measures reasonably calculated to attract patients’ attention.

Under the final regulations, a hospital facility’s FAP, FAP application form, and PLS must be made available in English and in the primary language of any population which constitutes the lesser of 1,000 individuals or 5 percent of the community served by the hospital facility; Limited English Proficiency (“LEP”). The IRS revised the 2016 Schedule H, with the addition of Part V, Section B, Line 16i to allow a tax-exempt hospital facility to indicate whether or not it was in compliance with this requirement.

IRC §501(r)(5) requires tax-exempt hospital facilities to limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under its FAP to not more than the amounts generally billed to individuals who have insurance covering such care. The IRS revised the options under Part V, Section B, Line 22 to indicate how the tax-exempt hospital determined, during the tax year, the maximum amounts that can be charged to FAP-Eligible individuals for emergency or other medically necessary care as follows:

  • Line 22a – The hospital facility used a look-back method based on claims allowed by Medicare fee-for-service during a prior 12-month period;
  • Line 22b – The hospital facility used a look-back method based on claims allowed by Medicare fee-for-service and all private health insurers that pay claims to the hospital facility during a prior 12-motn period;
  • Line 22c – The hospital facility used a look-back method based on claims allowed by Medicaid, either alone or in combination with Medicare fee-for-service and all private health insurers that pay claims to the hospital facility during a 12-month period; or
  • Line 22d – The Hospital facility used a prospective Medicare or Medicaid method.

IRC §501(r)(6) requires a tax-exempt hospital facility to forego extraordinary collection actions (“ECAs”) before making reasonable efforts to determine an individual’s eligibility under the tax-exempt hospital facility’s FAP.

Part V, Section B, Lines 18 and 19 which address actions that may be taken by a hospital facility under its FAP and actions that have been taken by the hospital facility during the tax year before making reasonable efforts to determine an individual’s FAP-eligibility have both been revised.  A new option has been added under both questions; Line 18c and Line 19c, “Deferring, denying or requiring payment before providing medically necessary care due to nonpayment of a previous bill for care covered under the hospital facility’s FAP.”

The IRS revised the options under Part V, Section B, Line 20 as follows to provide the tax-exempt hospital facility the opportunity to indicate which efforts the tax-exempt hospital facility or other authorized party made before initiating any of the following actions:

  • Provided a written notice about upcoming ECAs and a plain language summary of the FAP at least 30 days before initiating those ECAs;
  • Made a reasonable effort to orally notify individuals about the FAP and FAP application process;
  • Processed incomplete and complete FAP application; or
  • Made presumptive eligibility determinations.

Conclusion

Other than the revisions to the Schedule H in Part V, Section B which address and conform to the final IRC §501(r) regulations, the 2016 Schedule H contains no other significant changes.  The IRS revised and updated the 2016 Schedule H to expand the reporting requirements for tax-exempt hospital facilities which are required to report on their compliance with IRC §501(r).  It is important to note that the 2016 Schedule H instructions have also been updated to conform to and explain the changes made to the Schedule H itself and to more closely reflect the IRC §501(r) final regulations.

When completing the 2016 Schedule H, tax-exempt hospital facilities should ensure that their Schedule H accurately reflects their compliance with the final regulations.

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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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