Guidance for tax-exempt hospitals to report list of providers covered by FAP.

• Author: Benjamini, Nanaz
• Position: Financial assistance policy

On June 26, 2015, the IRS issued Notice 2015-46, which provides guidance to tax-exempt hospitals on how they may satisfy the requirement to report a list of providers who provide emergency or other medically necessary care in their facility that are covered by the hospital's financial assistance policy (FAP).

Tax-exempt hospitals qualifying as Sec. 501(c)(3) organizations are exempt from income taxes on income related to their exempt purpose. Tax-exempt hospitals have been the subject of increased congressional scrutiny for many years, leaving many legislators questioning whether the amount of community benefit and relief provided by tax-exempt hospitals justifies the tax subsidy provided by their tax exemptions. As a direct result of this scrutiny, the Patient Protection and Affordable Care Act, P.L. 111-148, enacted on March 23,2010, added to the Internal Revenue Code Sec. 501(r), which imposes additional requirements for tax-exempt hospitals to qualify as Sec. 501(c)(3) organizations. A tax-exempt hospital organization must meet all of the following requirements on a facility-by-facility basis to qualify as a Sec. 501(c)(3) organization:

* It must establish written financial assistance and emergency medical care policies (FAP);

* It must limit amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital's FAP;

* It must make reasonable efforts to determine whether an individual is eligible for assistance under the hospital's FAP before engaging in extraordinary collection actions against the individual; and

* It must conduct a community health needs assessment (CHNA) and adopt an implementation strategy at least once every three years.

With respect to the requirement for a written FAP, the IRS issued final regulations explaining that a hospital facility's FAP must apply to all emergency and medically necessary care provided in the hospital facility to the extent that the care is provided by the hospital facility itself or an entity that is substantially related to the hospital. The IRS further clarified that a hospital facility's FAP must include a list of providers, other than the hospital facility itself, that deliver emergency or other medically necessary care in the hospital facility, and the list must specify which providers are covered by the hospital facility's FAP and which providers are not (Regs. Secs. 1.501(r)4(b)(1)(i) and 1.501(r)-4(b)(1)(iii) (F)).The final...