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Senator Grassley Renews Inquiry of Tax-Exempt Hospitals

In a letter to Charles Rettig, Internal Revenue Service (“IRS”) Commissioner, Senate Finance Committee Chairman Charles Grassley (R-Iowa) requested that the IRS provide data on how many tax-exempt hospitals are in compliance with Internal Revenue Code (“IRC”) §501(r) and status of IRS examination for tax-exempt hospitals which are not in compliance.

IRC §501(r) was introduced as part of the Patient Protection and Affordable Care Act (“PPACA”) and created new requirements with which tax-exempt hospitals are required to comply. The PPACA requires the IRS to review whether or not hospitals are in compliance with IRC §501(r).

Under IRC §501(r), IRC §501(c)(3) organizations that operate one or more hospital facilities are required to meet four general requirements on a facility-by-facility basis, which are all briefly outlined below:

  • IRC §501(r)(3) requires all tax-exempt hospital organizations to conduct a community health needs assessment, on a hospital facility by facility basis, once every three years for all tax years beginning after March 23, 2012.
  • IRC §501(r)(4) requires all tax-exempt hospital organizations to establish a written financial assistance policy (“FAP”) and widely publicize the FAP within the community the organization servces.
  • IRC §501(r)(5) requires all tax-exempt hospital organizations to limit the amount charged for any emergency or other medically necessary care it provided to a FAP-eligible individual to not more than the amounts generally billed to individuals with insurance covering that care.
  • IRC §501(r)(6) requires that all tax-exempt hospital organizations may not engage in extraordinary collection actions against an individual before making reasonable efforts to determine whether the individual is FAP-eligible.

Senator Grassley requested data about the compliance of tax-exempt hospitals with IRC §501(r) as well as the status about current IRS examinations with tax-exempt hospitals that are not in compliance. In addition, Senator Grassley states, “Making sure that tax-exempt hospitals abide by their community benefit standards is a very important issue for me.”

In his letter to Charles Rettig, Senator Grassley noted that he is renewing his probe into tax-exempt hospitals due to hearing that “at least some of these tax-exempt hospitals have cut charity care, despite increased revenue, calling into question their compliance with the standards set by Congress.” Senator Grassley has remained focused on ensuring that tax-exempt hospitals abide by their community benefit standards.

Under the scope of Senator Grassley, it is imperative that these tax-exempt hospitals give back to the communities in which they serve and are in compliance with the requirements for tax-exempt status and IRC §501(r). Withum’s Healthcare Services team is fully equipped to assist tax-exempt hospitals in reviewing their current policies to ensure they are in compliance with IRC §501(r) in a possible compliance check or examination by the IRS.

If you have any questions or to learn more, fill out the form below and a member of our Healthcare Services team will be in touch.

Healthcare Services

Authors: Eric Cooper | ecooper@withum.com and John Smith | jsmith@withum.com

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