1. 2010 Update Chapter 4: The Legal Structure and Governance of Healthcare Organizations By Dean M. Harris 3rd Edition July 20, 2010 Contemporary Issues in Healthcare Law and Ethics

2. 2010 Health Reform Legislation— Important Changes for Nonprofit Hospitals The third edition of the text (pages 47–48) analyzed the legal requirements nonprofit hospitals had to meet to maintain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, as well as the benefits of exemption. Those pages also described the controversy over the obligations of tax-exempt hospitals to provide charity care and prove they provided benefits to their local community. In the 2010 health reform legislation, Congress addressed these issues and made some important changes, as analyzed on the following slides. 2 Copyright 2010 Health Administration Press

3. Section 9007 Created Four Additional Requirements for Tax-exempt Hospitals The federal health reform legislation (HR 3590, Section 9007) amended Section 501(c)(3) of the Internal Revenue Code. To qualify as a tax-exempt, charitable hospital organization, the hospital must meet four additional requirements: Community health needs assessment Written financial assistance policy Limitations on charges Limitations on billing and collection 3 Copyright 2010 Health Administration Press

4. New Requirement to Conduct a Community Health Needs Assessment Section 9007 provides that the hospital’s community health needs assessment must consider “input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health.” The assessment must be “made widely available to the public.” The assessment must be conducted at least every three years. The hospital must adopt “an implementation strategy to meet the community health needs identified.” 4 Copyright 2010 Health Administration Press

5. New Requirement—A Hospital’s Written Financial Assistance Policy Must Include: “(i) eligibility criteria for financial assistance, and whether such assistance includes free or discounted care, (ii) the basis for calculating amounts charged to patients, (iii) the method for applying for financial assistance, (iv) in the case of an organization which does not have a separate billing and collections policy, the actions the organization may take in the event of non-payment, including collections action and reporting to credit agencies, and (v) measures to widely publicize the policy within the community to be served by the organization” (Section 9007). 5 Copyright 2010 Health Administration Press

6. Hospital Must Also Have Written Policy About Emergency Care Under EMTALA To meet the new requirements for tax-exempt status under Section 501 (c)(3), a hospital must have a written policy about the provision of emergency care, as required by the Emergency Medical Treatment and Active Labor Act (EMTALA). Specifically, a tax-exempt hospital must have a written policy that requires it to provide the care required by EMTALA without discrimination, and regardless of an individual’s eligibility under the hospital’s financial assistance policy. 6 Copyright 2010 Health Administration Press

7. New Requirement Regarding Limitations on Hospital Charges A tax-exempt hospital must limit “amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy…to not more than the lowest amounts charged to individuals who have insurance covering such care….” (Section 9007). In addition, the hospital may not use gross charges for that purpose. These requirements were created so that uninsured individuals are not charged more than the rates for groups of insured patients that receive volume discounts. 7 Copyright 2010 Health Administration Press

8. New Requirement Regarding Limitations on Billing and Collection A tax-exempt hospital organization must “not engage in extraordinary collection actions before the organization has made reasonable efforts to determine whether the individual is eligible for assistance under the financial assistance policy….” The IRS may issue regulations (or other guidance) to carry out these new requirements, “including guidance relating to what constitutes reasonable efforts to determine the eligibility of a patient under a financial assistance policy” (Section 9007). 8 Copyright 2010 Health Administration Press

9. Further Information and Guidance May Become Available on the IRS Website By Notice 2010-39, the IRS invited written comments, until July 22, 2010, about the application of these new requirements for tax- exempt hospitals. In the future, additional information and guidance should become available on the IRS website at: www.irs.gov/charities/index.html www.irs.gov/charities/index.html 9 Copyright 2010 Health Administration Press