IRS Clarifies Treasury Regulations

IRS Clarifies Treasury Regulations Surrounding Inclusion of a “Provider List” in its Financial Policies

Janet Hodgdon, Healthcare Consulting Director
July 2015

Hospitals were blindsided by a portion of the Treasury department’s final rule, issued on December 29, 2014, regarding the 501(r) requirements for inclusion of a provider list in a hospital’s financial assistance policies (FAP). This list had to include any providers other than the hospital facility itself, delivering emergency or other medically necessary care in the hospital facility and, further, specify which providers are and are not covered by the hospital’s FAP. This onerous requirement had not been in any of the proposed rules or previous issuances and was only included in the final rule, which caught many, if not all, hospital facilities by surprise.

The IRS and Treasury Department received many comments following issuance of the final rule regarding this particular requirement, most often expressing concern regarding the burdensome difficulty in complying with this, given how frequently a provider list at a hospital can change.

Due to the overwhelming response of this particular requirement, the following clarifications have been published and are applicable for taxable years after December 29, 2015:

  • A hospital facility’s FAP must continue to include a list of any providers, other than the hospital facility itself, providing emergency or other medically necessary care in the hospital facility and specify which are covered under the FAP and which are not. For purposes of this requirement, the names of either individual doctors, practice groups or any other entities can be used. Further, a hospital facility may specify providers by reference to a department or type of service and then indicate whether the providers in those departments are covered by the FAP or not.
  • If a provider is partially covered by a hospital facility’s FAP, then the circumstances must be described in which the emergency or other medically necessary care will and will not be covered by the FAP. The example given is “if the hospital facility has a contract with an outside provider to deliver certain specialty services in the hospital facility’s emergency room that are covered by the FAP but other emergency or medically necessary care delivered in the hospital facility by the provider is not covered by the FAP, the hospital facility must describe the circumstances in which the outside provider’s services will and will not be covered by the FAP.”
  • A hospital’s provider list must indicate whether the services of a particular provider are or are not covered by the FAP but is not required to indicate whether that provider’s services are, or may be, covered by another entity’s financial aid policy or program.
  • It is confirmed that a hospital facility can maintain the list of providers in a document separate from the FAP, such as an attachment or appendix, provided that the document includes the date on which it was created or last revised. The FAP must then disclose that the list of providers is separately maintained and explain how members of the public may readily obtain it free of charge, both online and on paper.
  • If the only change to the FAP is the provider list being updated, then it does not need to be approved every time by an authorized body of the hospital facility in order for the FAP to continue to be considered “established.”
  • Minor omissions and errors that are inadvertent or due to reasonable cause are not considered failures to meet the requirements of 501(r) if they are promptly corrected once identified. They also are not required to be disclosed. This includes errors or omissions in the provider list if the hospital facility makes reasonable efforts to ensure the list is accurate. Quarterly updates for new, missing or inaccurate information will be considered sufficient.

In summary, these clarifications should somewhat ease the reporting burden of this particular requirement of the 501(r) regulations. For questions or further clarification on this or any other section of 501(r), please contact Janet Hodgdon at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.