IRS releases final Section 501(r) regulations for tax-exempt hospitals

AHA News

The Internal Revenue Service (IRS) Dec. 29 released a final rule implementing requirements for tax-exempt hospitals under Section 501(r) of the Affordable Care Act (ACA). The final rule, which was published in the Dec. 31 Federal Register, mirrors much of the proposed rule’s requirements for charitable hospital organizations’ financial assistance and emergency care policies, limitations on charges for care provided to individuals eligible for financial assistance, billing and collection actions, and conducting a community health needs assessment (CHNA).

According to an accompanying blog post by Emily McMahon, the Treasury Department’s assistant secretary for tax policy, the regulations “adopt the same framework of proposed regulations but simplify the compliance process for charitable hospitals, while continuing to provide meaningful guidance on protections for patients and requirements to assess community health needs.”

On financial assistance, the final rule requires hospitals to incorporate into billing statements, a conspicuous written notice to inform patients about the availability of financial assistance and contact information if they want to learn more. Hospitals need to offer patients a plain-language summary of the assistance policy as part of the intake or discharge process.

The rule lowers the threshold for having translations of the financial assistance policies available for populations with limited English proficiency. Previously, translations were required if those populations constituted more than 10% of the community served by the hospital. Under the new rules, the threshold is 5% of the population or 1,000, whichever is less.

On CHNAs, the final rule allows a hospital facility to collaborate with other hospital facilities and produce one joint CHNA report and implementation strategy, provided the hospitals define their communities to be the same and the governing body of each adopts the CHNA and strategy.

The IRS said the final rule defines “hospital organization” as one that is recognized, or seeking to be recognized, as exempt under tax code Section 501(c)(3) and that operates one or more hospital facilities. In turn, those facilities are defined as required by a state to be licensed, registered or similarly recognized as a hospital.

The final rule will apply to taxable years beginning after Dec. 29, 2015, providing at least one year for hospitals to come into compliance. The final rule states that for taxable years beginning on or before Dec. 29, 2015, a hospital may rely on a reasonable good faith interpretation of the legislation, and will be deemed to do so if it has complied with the provisions of the 2012 or 2013 proposed regulations or these final regulations.

For more on the final rule, click on:

The AHA has outlined guidelines that are intended to strengthen the relationship between hospitals and their communities and to reassure patients, regardless of their ability to pay, of hospitals' commitment to caring. To view the guidelines and other resources, visit

Topic: Advocacy and Public Policy
Tag: Community benefit

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