With the arrival of December, the deadline for full compliance with most aspects of Internal Revenue Code Section 501(r) is now just one month away for many tax-exempt hospital organizations. The specific deadlines will vary, however, based upon a hospital’s tax year and other factors. Hospital leadership should take this opportunity to confirm the applicable deadlines and to verify that the hospital is on track for timely compliance.
Treasury and the Internal Revenue Service published the final regulations for Code Section 501(r) in the Federal Register on December 31, 2014. These regulations state that they apply to taxable years beginning after December 29, 2015. This means that a calendar year hospital must be in full compliance with the final regulations by January 1, 2016. By now, these hospitals should have developed or updated their financial assistance and emergency care policies and had those policies reviewed for full compliance before being approved by the hospital board or other authorized body. They also should have calculated their “amount generally billed” and ensured that their billing and collection policies and procedures are consistent with the regulatory mandates. This final month before the full compliance deadline gives hospitals the opportunity to ensure that they have properly educated their personnel and thus can avoid inadvertent violations of the new requirements.
For other organizations, the deadline for compliance with the final regulations hinges upon the organization’s upcoming tax year. As the largest category, hospitals whose tax years begin on July 1 will have until that date in 2016 to satisfy the final regulations. Many of these hospitals are still in the earlier stages of compliance, but their calendar year counterparts likely would encourage them to move forward as swiftly as possible to avoid the challenges of implementing these detailed requirements in the eleventh hour.
A separate caution is necessary regarding the community health needs assessment (“CHNA”) requirement. Code Section 501(r)(3) expressly requires a hospital to complete a CHNA and adopt a corresponding implementation strategy at least once every three years. Because of the effective date of the statutory requirement, most hospitals completed their CHNAs and adopted their implementation strategies in 2013, which means that their next CHNAs and implementation strategies are due in 2016. More specifically, organizations whose tax years begin mid-year likely will have to complete their CHNAs and implementation strategies by the end of their current tax year (e.g., by June 30, 2016), while calendar year organizations likely will have until the end of their next tax year (i.e., by December 31, 2016) to finish this process.
As this discussion illustrates, the question of when a hospital must comply with Code Section 501(r) can be a complicated one. Hospital leadership should communicate with the individuals leading their compliance efforts, as well as with legal counsel, to ensure that all requirements are met in a timely fashion.
For more information, please contact:
- Jeff Carmichael at (317) 977-1443 or jcarmichael@wp.hallrender.com;
- Calvin Chambers at (317) 977-1459 or cchambers@wp.hallrender.com; or
- Your regular Hall Render attorney.
