Www.eidebailly.com Presented by: Marie Murphy Manager, Health Care Revenue Cycle Consulting 701.476.8321 [email protected] 501(r) Regulations and

www.eidebail ly.comwww.eidebail ly.com

Presented by:

Marie Murphy

Manager, Health Care Revenue Cycle Consulting

701.476.8321

[email protected]

501(r) Regulations and Financial Assistance Policies


Agenda

• 501(r) Background• Definitions• Financial Assistance Policies• Limitations on Charges• Billing and Collections


501(r) Background

• The Patient Protection and Affordable Care Act requires hospitals under §501(c)(3) to meet requirements to maintain tax exempt status• Community Health Needs Assessment (CHNA)• Financial Assistance (FAP) and Emergency Care

Policies• Limitations on Charges• Billing and Collections Policies and Practices


501(r) Background

• Proposed Regulations issued on June 22, 2012 to provide guidance on:• Financial Assistance and Emergency Care Policies• Limitations on Charges• Billing and Collection Policies and Practices

• Proposed Regulations issued on April 13, 2013 to provide guidance on:• Community Health Needs Assessments• Consequences for failing to meet requirements

• Final Regulations issued December 29, 2014


501(r) Background

• Compliance with 501(r) law required for tax years beginning after March 23, 2010

• Regulations provide guidelines for interpreting the law

• Must be in compliance with final regulations for tax years beginning after December 30, 2015


501(r) Background

• Failure to meet requirements results in loss of tax exempt status under 501(c)(3) for the noncompliant hospital facility• Exceptions for minor omissions and errors that are

inadvertent and due to reasonable cause• Requires correction and disclosure


501(r) Background

• Applies to a Hospital Organization• Organization that is recognized (or seeks to be

recognized) under IRC §501(c)(3) that operates one or more hospital facilities

• Must meet the rules separately with respect to each hospital facility

• Includes governmental hospital with dual status• Confirm 501(c)(3) status by reviewing Master File on IRS

website


501(r) Background

• Hospital Facility• State licensed, registered, or similarly recognized as

a hospital:• Multiple buildings operated under a single state license are

considered a single hospital facility • Does not include a facility outside the US


501(r) Background

• Operating a Hospital Facility• Through organization own employees or contracting

out to another organization• Sole member or owner of a disregarded entity that

operates a hospital• Ownership (directly or indirectly) of a capital or profits

interest in an entity treated as a partnership that operates a hospital unless:

• Organization does not have control and treats income from partnership as unrelated business income

• Partnership operated for educational and scientific purposes and has not engaged primarily in operation of hospital


Financial Assistance Policy-Statute

• Policy must be in writing and include: • Eligibility criteria for financial assistance and whether such

assistance includes free or discounted care• The basis for calculating amounts charged to patients • The method for applying for financial assistance• If the hospital organization does not have a separate billing and

collections policy, the actions the hospital may take in the event of nonpayment

• Measures to widely publicize the policy within the community served by the hospital facility


Financial Assistance Policy Requirements

• Applies to all emergency and medically necessary care provided by the facility and any partnership, disregarded entity that provides care in the hospital facility

• Policy must be widely publicized• In addition to requirements under the Code, must

include:• Information obtained from sources other than the individual and

whether and how hospital uses prior FAP-eligibility determinations

• List of providers, other than hospital, delivering emergency or other medically necessary care and whether they are covered under the FAP


Eligibility Criteria and Basis for Calculating

• Financial assistance available, including discounts and free care (under the FAP) and the amounts to which discounts will apply

• All eligibility criteria that an individual must satisfy to receive assistance

• Method used to determine the amount generally billed (AGB)• Percentage of discount and how calculated or• How to obtain information in writing

• Indication that once eligible for financial assistance, may not be charged more than AGB


Method for Applying for Assistance

• Describe how an individual applies for financial assistance

• FAP or FAP application must include a list of any required information or documentation to be submitted with the application

• Provide contact information (telephone and physical location) for resource who can assist with the application process• Hospital office or department• Nonprofit or government agency


Actions Taken for Nonpayment

• Action the hospital (or authorized party) may take relating to obtaining payment including extraordinary collection actions (ECAs)

• Process and time frame used to determine if an individual is eligible for financial assistance

• Who in the organization is responsible for determining if reasonable efforts have been made to assess the patient’s eligibility so collection actions may begin

• If information is described in a separate billing and collection policy• Indicate how members of the public may obtain a free copy of

this separate policy


Widely Publicizing the FAP

• Post the FAP, FAP application, and plain language summary on facility, hospital, or other website• Hospital website must provide link to other website

along with clear instructions for accessing website• Must not require special hardware or software or require a fee to

download or creating an account with personal information

• Make paper copies of the FAP, FAP application, and plain language summary available upon request and free of charge by mail and in the hospital emergency room and admissions areas


Widely Publicizing the FAP

• Notify and inform those members of the community most likely to require assistance

• Notify and inform visitors and patients• Offer a copy of the plain language summary as part of the

intake or discharge process• Include conspicuous written notice on all billing

statements with telephone number of department to provide information and website address where copies can be obtained

• Provide conspicuous public display (reasonably calculated to attract attention) to notify patients about FAP availability in emergency room and admissions areas


Accessibility to Non-English Speakers

• Must translate FAP, FAP application, and plain language summary into the primary language spoken by populations of limited English proficiency• Language group made up of the lesser of 1,000

individuals or 5% of the community served• May use any reasonable method to calculate

population


Plain Language Summary

• Brief description of eligibility requirement and assistance offered• Brief summary of how to apply for assistance• Web site address and physical locations to obtain FAP and

application form• Instructions on how to receive copy of FAP and application by mail• Contact information (telephone and physical location) for resource

who can assist with the application process• Hospital office or department• Nonprofit or government agency

• Statement of availability of translations• Statement that FAP may not be charged more than AGB for

emergency and medically necessary


Emergency Medical Care Policy

• Hospital facility must provide, without discrimination, care for emergency medical conditions to individuals regardless of their eligibility under the FAP

• Will meet requirements if policy requires care be provided under existing federal laws such as the Emergency Medical Treatment and Labor Act (EMTALA)

• Must prohibit the hospital facility from engaging in actions that discourage individuals from seeking emergency medical care


Establishing the Policies

• Adopted by an authorized body of the hospital• Governing body or a committee thereof• Other party authorized under governing body as

permitted under state law

• Implemented by the hospital facility by consistently carrying out the policy

• May be established by more than one facility if identical across facilities• May have different AGB percentages or methods of

calculating AGB


Limitation on Charges-Statute

• Must limit amounts charged for emergency or other medically necessary care to a FAP-eligible individual to not more than the amounts generally billed (AGB) to individuals with insurance covering that care

• Prohibits the “use of gross charges”


Limitation on Charges

• Choose method to determine AGB• Look Back Method• Prospective Medicare• Other method specified in future regulations or guidance

• Different facilities can use different methods• Facility can change method at any time

• Need to update FAP with information on method used

• Limitation applies to the amount patient is personally responsible for paying after deductions, discounts, and insurance have been applied


Look-Back Method

• Based on actual allowed by either:• Medicare fee-for-service• Medicare fee-for-service and all private health

insurers; or• Medicaid alone or with either of the above

• Calculated at least annually based on claims allowed• Select a 12 month period to use for the calculation• Must begin applying to gross charges for FAP-eligible

patients within 120 days of the end of the calculation period


Look-Back Method

• Calculation:• Sum of all claims allowed by health insurers for

emergency and other medically necessary care from either:

• Medicare and payments from Medicare beneficiaries OR• Medicare and all private health insurers including co-

payments, co-insurance, or deductibles from beneficiaries or insured individuals

• Divided by:• Sum of the associated gross charges related to those claims


Look-Back Method

• May calculate multiple AGB percentages• May calculate off of all medical claims versus

just medically necessary and emergency• May calculate one AGB percentage for all

hospitals covered under the same Medicare number


Prospective Method

• Based on the billing and coding process the hospital facility would use if the FAP-eligible individual were • Medicare fee-for-service • Medicaid beneficiary or • Both

• AGB is set at the amount the hospital facility determines would be the total payment for the care from• Medicare or Medicaid reimbursement and • Beneficiary payments


Gross Charges

• Must charge FAP-eligible individual less than gross charges for any medical care covered under the FAP

• Billing statements may state gross charges as a starting point before applying various allowances, discounts, and deductions

• Amount personally responsible for paying must be less than gross charge


Safe Harbor

• Will not violate limitation on charges rule if charge more than AGB to FAP-eligible individual if• Charge was not made or requested as a pre-

condition of providing medically necessary care to a FAP-eligible individual

• Patient has not completed application• Must correct amount charged when found to be FAP-

eligible (if > $5)


Billing and Collection-Statute

• Requires that a hospital facility not engage in “extraordinary collection actions” (ECA) against patients before reasonable efforts have been made to determine if the person qualifies for financial assistance


Extraordinary Collection Actions

• Selling of debt to another party unless• Purchaser is prohibited from engaging in ECA• Purchaser is prohibited from charging more than FMV

interest• Debt is returnable to hospital if patient is FAP eligible; and• If debt not returned, purchaser ensures patient pays no

more than obligated to pay under FAP

• Reporting adverse information to credit agencies or bureaus

• Deferring, denying, or requiring payment before providing medically necessary care due to outstanding bills


Extraordinary Collection Actions

• Require legal or judicial process• Liens on property• Foreclosure on real property• Attaching or seizing bank accounts• Commencing civil action• Causing arrest• Subjection to writ of body attachment• Garnishing wages


Reasonable Efforts

• Presumptive FAP determinations based on third-party information or prior eligibility• If determine patient is eligible for less than the most

generous discount under the FAP• Must notify the patient regarding the basis for the

presumptive determination and how to apply to obtain more generous assistance

• Provide reasonable time to apply for more assistance before starting ECAs

• Must review applications submitted during the application period


Reasonable Efforts

• Notification and Processing Applications• Notify an individual about its FAP for at least 120 days from

the date of first post-discharge billing statement;• Properly address an incomplete FAP application; AND, • Make a determination of eligibility on all complete forms

• If individual fails to submit FAP application by end of notification period and notification requirements were met, hospital may engage in ECA• Must still accept and process FAP during application period


Notification Requirements

• At least 30 days before initiating ECAs:• Written notice is provided

• Informs about the ECAs the facility intends to take if individual does not submit a FAP application or pay the amount due

• Includes a plain language summary of the FAP

• Hospital makes reasonable effort to orally notify the individual about FAP and how to obtain assistance with the FAP application process

• Indicate a deadline


Notification Requirements

• Deferring or denying care due to nonpayment• Not required to make notice at least 30 days before

initiating if:• Provides FAP application form and written notice of FAP

assistance indicating a deadline for submission for the previously provided care (later of 30 days of the notice or 240 days from the first post-discharge billing for previous care)

• Must provide a plain language summary• Hospital makes reasonable effort to orally notify the individual

about FAP and how to obtain assistance with the FAP application process

• Must process application on expedited basis once received

• Still subject to rules under EMTALA for emergency care


Reasonable Efforts

• Application Period• Begins on the first day of care and ends on the 240th

day after the hospital facility provides the individual with the first post-discharge statement

• If an individual submits a complete or incomplete FAP application during the application period, the hospital must process the application and determine eligibility


Reasonable Efforts

• If an individual submits an incomplete FAP application during the application period, the hospital facility meets its reasonable efforts requirement if the hospital facility:• Suspends any ECAs against the individual related to

care at issue• Provides a written notice of additional information

needed and contact information for assistance• Provides a reasonable amount of time to submit

information


Reasonable Efforts

• If an individual submits a complete FAP application during the application period, the hospital facility meets the reasonable efforts requirement if it:• Suspends ECAs• Makes and documents a determination of FAP

eligibility in a timely manner• Notifies the individual in writing of the determination

of FAP eligibility and basis for determination


Reasonable Efforts

• If individual is FAP-eligible, the hospital must:• Provide a billing statement that indicates

• Amounts the individual owes as a FAP-eligible individual (if eligible for discounted care)

• How the amount was determined • How to get information regarding AGB

• Refund any excess payments made by the individual for the care at issue (if >$5)

• Take reasonable measures to reverse any ECAs taken against the individual

• Exception for sale of debt


Third Party Agreements

• If a hospital facility refers or sells debt to another party, reasonable efforts are deemed to be made if the hospital obtains a legally binding written agreement from the other party that they will:• Refrain from ECAs against individual until the hospital facility

has met reasonable efforts requirements• Suspends ECAs against the individual if they submit a FAP

application during the application period• If determined to be FAP-eligible, other party will do the

following in a timely manner:• Adhere to procedures to ensure the individual does not pay more than

required to pay under FAP• Takes reasonable measure to reverse any ECAs, AND• Obtains written agreement from any sub-parties that the sub-party is

adhering to the above requirements


General Provisions

• Reasonable efforts are not made if determination that non-FAP eligible based on unreliable information or information obtained under duress or coercive practice

• Can meet requirements by making determination based on completed application even if not all notification requirements were met

• May postpone determination of FAP eligibility during period where Medicaid eligibility is being determined


Conclusion

• Questions?

• Comments?


Contact Information

Marie Murphy

701.476.8321

[email protected]

This presentation is presented with the understanding that the information contained does not constitute legal, accounting or other professional advice. It is not intended to

be responsive to any individual situation or concerns, as the contents of this presentation are intended for general informational purposes only. Viewers are urged not to act upon the information contained in this presentation without first consulting competent legal, accounting or other professional advice regarding implications of a particular factual situation. Questions and additional information can be submitted to

your Eide Bailly representative, or to the presenter of this session.

Documents

Www.eidebailly.com Presented by: Marie Murphy Manager, Health Care Revenue Cycle Consulting 701.476.8321 [email protected] 501(r) Regulations and