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IRS Final Rule Regulations Affect Tax-Exempt Hospitals

Now is the time to prepare for the Internal Revenue Service (IRS) Final Rule regulations for tax-exempt hospitals. The Patient Protection and Affordable Care Act (PPACA) requires every nonprofit hospital to widely publicize its financial assistance policy (FAP).1 The FAP must include a list of every provider that delivers emergency or other medically necessary care in the hospital and specify which of these providers are covered by the hospital’s FAP.2 Failure to comply with this requirement can result in the revocation of tax-exempt status under section 501(c)(3) of the IRS.

While this provision was included in the final regulations, it was not included in the proposed regulations or subject to requests for comment. Albeit significant and potentially arduous, this requirement complements the four components necessary to adhere to the PPACA.3 These components are as follows:

  1. Establish and disclose a financial assistance policy.
  2. Conduct consistent billing rates for individuals eligible for financial assistance, Medicare patients or private commercial insurance patients.
  3. Observe fair billing and debt collection practices.
  4. Conduct a community needs assessments at least once every three years.

This regulation will apply to taxable years beginning after December 29, 2015. 

1 PPACA § 9007
2 79 Fed. Reg. 78956, 79005
3 Id.

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume V, Number 168


About this Author

John Donahue Tax & Employee Benefits Attorney

John Donahue is a shareholder in the Tax and Employee Benefits Practice Group. He works in the Milwaukee office.

John’s practice includes tax, employment and corporate law with a primary emphasis on employee benefits. He advises businesses and their owners regarding the design, installation, maintenance and termination of pension plans, 401(k) programs, employee stock ownership plans and other benefit programs. John provides guidance on the employee benefit aspects of mergers and acquisitions, and he assists clients in responding to regulatory inquiries and disputed benefit claims....

Thomas Shorter Healthcare Attorney Godfrey Kahn Law Firm

Thomas N. Shorter is a shareholder in the firm's Madison office and Chair of the Health Care Team. Tom represents hospitals, physicians' groups, research institutions and health care related organizations, as well as other businesses, providing counsel on health care, corporate, labor and employment and regulatory matters. For clients in the health care industry, Tom handles matters regarding Medicare compliance, Health Insurance Portability and Accountability Act (HIPAA), Emergency Medical Treatment and Labor Act (EMTALA), Physician Self-Referral (Stark), and Anti-Kickback. Additionally, Tom is also called upon by other organizations to handle management-side legal corporate and employment issues, including the Family and Medical Leave Act (FMLA), Fair Labor Standards Act (FLSA) compliance, Individuals with Disabilities Education Act (IDEA), Section 504, and Americans with Disabilities Act (ADA).