INSIGHTS AND RESOURCES
Tax-exempt hospitals: Financial assistance policy compliance checks
INSIGHT ARTICLE |
Authored by RSM US LLP
Among the IRS’s compliance strategies for fiscal year 2021 is a focus on tax-exempt hospitals and their financial assistance policies. To this end, some tax-exempt hospitals have received compliance checks from the IRS inquiring about the adoption and implementation of their financial assistance policies. In general, a compliance check inquires about a taxpayer’s activities, operations, and reporting on a particular topic of interest to the IRS. Although it is not considered an examination, there may be situations when a compliance check is referred for examination.
Section 501(r), enacted by the Affordable Care Act, imposes additional requirements on tax-exempt hospitals: (1) community health needs assessments, (2) financial assistance policies, (3) billing and collection policies, and (4) limitations on charges. Failure to meet any of these requirements may result in the hospital organization losing its tax-exempt status.
In particular, section 501(r)(4) requires each licensed hospital facility to establish a written financial assistance policy (FAP) and a written emergency medical care policy. Treas. Reg. section 1.501(r)-4 sets forth a number of specific criteria to satisfy these requirements. Tax-exempt hospitals demonstrate their compliance with these requirements on their annual Forms 990, Schedule H.
Financial assistance policy compliance checks
To identify hospitals with possible compliance issues, the IRS reviews a hospital’s Form 990, Schedule H and its external website. Rather than always conducting a full-scale IRS exam, the IRS has developed and sent compliance check questionnaires to some tax-exempt hospitals to evaluate their compliance with section 501(r)(4).
Hospitals have reported receiving compliance checks that request the following information
- How the hospital makes its FAP widely available
- The method for applying for financial assistance; and
- The list of providers both covered and not covered by the FAP.
How Can RSM help?
RSM’s tax-exempt healthcare professionals can assist tax-exempt hospitals in responding to these compliance checks, reviewing their FAPs, and evaluating their compliance with section 501(r)(4). Our experience with the tax-exempt healthcare sector enables us to provide tax-exempt hospitals with insights about how to successfully demonstrate compliance, identify gaps relating to establishing and implementing FAPs, and evaluate overall compliance with section 501(r).
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Zack Fortsch, Alexandra Mitchell, Morgan Souza, Rebekuh Eley and originally appeared on 2021-03-19.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.