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Navigating the Seas of Section 501 (r) and Schedule H ChangesCaptain Ryan Lindsay, Gray Griffith & Mays CPAS

1Welcome Aboard!!I wanted to select a vessel for our trip

Welcome Aboard!!

3Maiden Voyage Muster Station-Tax newsIRC 501 (r) & Sched HImpact & Burden of 501 (r)Return to Port

4Muster Drill- Tax NewsFor the Fiscal year Oct 1, 2013 thru Sept 30, 2014 the IRS received 765,395 Tax Exempt Organization Returns. They examined 1.06% of these returns. That compares to .86% of individual returns and .57% Business Returns.

5Muster Drill- Tax NewsIRS BUDGET CUTSBetween Fed FY 2010 and 2015 the IRSs annual budget was cut by more than $1.2billion.

6Muster Drill- Tax NewsIRS BUDGET CUTSFor FY 2016, President Obama proposed a nearly $2 billion increase in this years budget.

House Republicans responded with a proposed $838M overall budget cut!!7Muster Drill Tax NewsIn April 2015, the NFL tossed their tax exempt status overboard. Why? Was a distraction PrivacyImageNot saving them that much money ($10B in revenues only made $9M bottom line) REALLY?!?Gets Congress, press off their back!

Tax exempt more of a distraction than Domestic violence, child abuse, drug use, etc?8Muster Drill Tax NewsIn June 2015 the Supreme Court Upholds Obamacare Tax SubsidiesThe Affordable Care Act is here to stay President ObamaIRS is behind on charitable organization applications. Applications are sometimes received 9-12 months before they are approved. 1023-EZ may be available but burden falls to donor. A lot of political discussions on Consumption or Sales tax

9Excursion- IRC 501(r)Timeline (Summary)ACA, enacted March 23, 2010 law was signed.US Supreme Court upheld ACA on June 18, 2012.In June 2012 and April 2013 we received proposed regulations on all 4 parts of IRC 501 (r) that affect hospitalsDecember 2014 - Final Regulations published in Federal Register.

10IRC 501(r)-FINAL REGS!WHEN??Apply to a tax-exempt hospital facilitys taxable year beginning after December 29, 2015

December Year Ends January 1, 2016 to be fully compliant

June Year Ends July 1, 2016 to be fully compliant

September Year Ends October 1, 2016 to be fully compliant

11IRC 501(r)What got us here?Patient ExpectationsRespectIntegrityStewardship

ExcellenceCollaborationKindness12IRC 501(r)What the patient experiencesPatient ExperienceMultiple & Complex BillsNot aware of charity policySent to collectionsNo flexibilityCollections on undiscounted pricesLawsuitsForeclosure & LiensHigh interest ratesStress13IRC 501(r)Brief Summary Section 501(r)(3)- Community Health Needs AssessmentSection 501(r)(4)-Financial Assistance Policy and emergency medical care policySection 501(r)(5)-Limitation on charges for medical necessary healthcare services and emergency medical care.Section 501(r)(6)-Reasonable efforts with respect to billing and collections before proceeding with extraordinary collection actions14IRC 501(r)-Final RegsCommunity Health Needs Assessment (CHNA)

Definition of the community servedDescription of the process and methods used to conduct the CHNADescribe how the hospital solicited info from publicPrioritized description of the process and criteria used to identify the health need as significantDescribe resources to potentially address the health need

15IRC 501(r)-Final RegsCommunity Health Needs Assessment (CHNA)

Implementation strategy must evaluate the impact of any actions taken since prior CHNA.Did you do what you said you were going to do? How did it impact community health?Joint CHNAs Allows hospital facilities with overlapping communities to collaborateMust be done by the 15th day of the fifth month following the end of the tax year which the hospital approves the CHNA.

16IRC 501(r)-Final RegsFAPs & Emergency Medical Care Policies

Requires Written FAP and EMC policies

Must apply to all emergency and other medically necessary care. Final regs expand to require the FAP to apply to all Substantially-related entities that provide emergency and other Med necessary care in the hospital facility. 17IRC 501(r)-Final RegsFAP/EMC policyOnly requires the FAP to describe discounts available under the FAPFAPs must include a listing of all providers delivering emergency or medical necessary care in the hospitalMust have a plan language summary offered to patients at the intake process or upon discharge.Hospitals may maintain joint policies for multiple facilities.

18IRC 501(r)-Final RegsFAP/EMC policyWidely Publicized Put FAP, FAP Application & PLS on WebsitePaper copies available upon request by mail and in public locations in hospitalInform members of the communityNotify and inform individuals who receive care from the hospital facility

19IRC 501(r)-Final RegsLimits on ChargesPatients should not be charged more than amounts generally billed (AGB)Look-back or ProspectiveFinal Regs permit hospital to change methods at any timeMust update the FAP first though

AGB must be calculated on a facility-specific basis not healthcare system. Can use different AGB approaches within the facility

20IRC 501(r)-Final Regs Look-Back MethodComputing an annual percentage discount to apply against the hospital facilitys gross charges for FAP eligible individuals2012 RegsPermitted hospital to use MEDICARE Fee-for-service claims alone or combined with all Private Health Insurers Final RegsAllowed hospitals to use MEDICAID claims: alone, in combination with Medicare fee-for service, or in combination with Medicare + Private Health Insurers

21QuestionWhat if Total amount paid by a FAP eligible individual + his/her health insurance is > ABG?

OKhospital is still in compliance with section 501(r)

AGB limitation applies only to the amount the patient is personally responsible for

22IRC 501(r)-Final RegsProspective Method2012 RegsSet rates as if individual were a Medicare fee-for-service beneficiary and setting AGB at the amount Medicare would allow for the care

Final RegsPermit the hospital to use Medicaid; either in lieu of or in combination with Medicare

23IRC 501(r)-Final RegsAGB must be calculated annually and implemented within 120 day of the calculation periodIRC 501(r)-Final RegsAGB TO DO LIST Confirm we have processes in place that prevent eligible patients from being charged more than AGBDevelop a method for calculating AGB that is consistent with the regulationChange the financial assistance policy and procedures to reflect the limit on AGBDetermine if a change in the calculation method would make senseIRC 501(r)-Final RegsThis will more than likely shift bad debt to Community (Charity) Care in many of your facilitiesIRC 501(r)-Final RegsPresumptive EligibilityBest to first make reasonable effort to determine eligibilityCan use scoring method based on known facts residence, autos, size of household, etc.CANT use the presumptive method to DENY Financial Assistance!!27IRC 501(r)-Final RegsWAIVERS

A signed waiver is not enough!!

Will not constitute a determination that the individual is not FAP-eligible and will not satisfy the requirement of reasonable efforts

28Billing and Collection-Final RegsExtraordinary Collection Actions (ECAs) = Cant engage in these actions before making reasonable efforts to determine FAP eligibility first

NEW ECA- deferring or denying, or requiring payment before providing medical necessary care.Hospital accountable for the ECAs of all third parties collecting debt on its behalf and to which is sells debtMust give notice = 30 days written notice-including PLS and FAP29QuestionWhat are some of the other ECAs?Placing a lien on an individuals propertyForeclosing on ind real propertySeizing an ind bank account or other personal propertyCommencing a civil action against an indCausing an ind arrestGarnishing an individuals wagesMaking an individual sit through one of Ryans presentations

30IRC 501(r)WHO Cares??Federal Lawmakers Stop Suing Poor PatientsAdvocacy GroupsIRSYour Board of Directors/TrusteesCFPB-Consumer Financial Protection Bureau

31Who Else is watching?Your Captain of course!

Theres some rough waters ahead

Of the 7 hospitals your Captain selected NONE of them were currently in compliance with 501(r)

32Whats at stake?Excise tax for failure to comply with CHNA requirements ($$$$)Revocation of Status Under 501(c)(3) of the CodeFacility Level tax ($$$$$$$)

332nd Excursion-Impact and Burden of 501(r)No time and money in our budgetIRS initially estimated 11.5 hours annually to complyAHA estimated 200-2,000 hrsHFMA estimated 120-2,700 hrsIRS final regs say 136 hours

Whats it going to take in your hospital?

34Impact and Burden of 501(r)Paperwork Reduction ActIn the Final regulations the word Notify is used 38 times. IRS estimates total annual reporting burden of 4,914 hrs. Which is approximately 2 hours per recordkeeper.The IRS has a sense of humor

35Impact and Burden of 501(r)How has Charity Care Changed?More Medicaid eligible patientsIncreased BAI (balances after insurance)DeductiblesCo-paymentsCo-insuranceDiscounts not included on hospitals FAP will not be considered community benefit.36Impact and Burden of 501(r)How could widely publicizing your Charity Care policies affect your relationship with insurers and employers?

Charges next year will be limited to AGB. Could be an impact to the high deductible plans in early 2016. 37Impact and Burden of 501(r)How will the AGBs be determined and applied to patient billing? Will your system do this or will this have to be manual?

Should the Hospital expand or contract income categories?

Should there be different category qualification for insured and uninsured?

38Returning to PortBest Practices:Develop FAP and applicationPost on Website, promote in community and around hospitalKeep application process SIMPLE SILLY!Develop presumptive eligibility model with reasonable efforts safeguards.Implement HFMAs Patient Financial Communications Best Practices39Thank You!!Contact Information:

J. Ryan Lindsay, DirectorGray Griffith & Mays a.c.ryan@ggmcpa.net304-389-4195

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