The National Law Forum

The Blog of the The National Law Review

Nonprofit Hospitals Face Additional Regulatory Burdens in Financial Assistance and Debt Collection

Poyner Spruill LLP Attorneys at Law, a North Carolina Law Firm

Roughly 60 percent of hospitals nationwide either have received or are seeking tax-exempt status under the United States Treasury Department (Treasury) and Internal Revenue Service (IRS) rules and regulations. With new final rules and regulations adopted by the Treasury and the IRS effective December 29, 2014, nonprofit hospitals (referred to in the Federal Register as “charitable hospitals”) now face a number of additional requirements when attempting to collect debts owed for care provided to patients and face additional mandates related to financial assistance policies and qualification of certain low-income patients for financial assistance.

The final rules and regulations clarify the broad provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA), which added Section 501(r) to the Internal Revenue Code (Code) imposing the following four additional requirements on charitable hospitals to maintain tax-exempt status:

  1. Conduct a community health needs assessment (CHN Assessment) at least once every three years and adopt an implementation strategy to meet those community health
    needs, or be subject to a $50,000 tax penalty.

  2. Establish a written financial assistance policy which prescribes the eligibility criteria for assistance, how patients apply for assistance, and how they are charged for care under the
    policy, and a written emergency medical care policy requiring emergency care to individuals regardless of their eligibility for financial assistance.

  3. Limit the use of gross charges and the amounts charged to those patients who qualify for financial assistance for emergency or other medically necessary care to not more than the amounts generally billed to individuals who have insurance covering such cases.

  4. Make reasonable efforts to determine whether an individual is eligible for assistance under the financial assistance policy before engaging in extraordinary collection actions (EC Actions).

Additionally, the PPACA insists that a charitable hospital organization meet each of the above requirements separately with respect to each facility it operates.

Below are some requirements from the new rules and regulations that may be potential areas of focus for regulators in their review and enforcement actions against charitable hospitals.

    • The CHN Assessment process requires careful documentation of each of the multiple levels of need assessment, community input and collaboration, and a hospital’s plan for addressing the need with an adopted strategy for implementation.

    • A hospital’s financial assistance policy must contain all eligibility criteria, all financial assistance and discounts available under the policy, and methods to apply for financial assistance, as well as any actions that may be taken in the event of nonpayment under certain circumstances.

    • Hospitals must continue to take certain measures to make the financial assistance policy, the policy’s application form and a plain language summary of the policy available upon request, available in certain areas of the hospital for visitors and patients (e.g. emergency department and hospital intake areas), available on a website, and available to members of the community served.

    • Certain additional written notices with financial assistance policy information, summaries and hospital contact information for policy-related documents must be provided to patients against whom a hospital actually intends to engage in EC Action.

    • Hospitals must limit the costs for any care for which financial assistance policy-eligible individuals will be personally responsible to not more than amounts generally billed (AGB), and the criteria and method for calculating the AGB must be clearly defined by a hospital in its financial assistance policy.

    • Reasonable efforts, as defined in the new regulations, must be followed and carefully documented by hospitals during each step of an EC Action assessment application, including notification and further billing and collection communication(s) with financial assistance policy-eligible individuals. The regulations define EC Action as including, among other things, reporting adverse information about the individual to credit bureaus; requiring or deferring medically necessary care because of nonpayment of bills for previously provided care; and instituting legal process such as liens, foreclosure, attachment of property, or garnishing wages.

The full Treasury and IRS rules and regulations related to the additional requirements on charitable hospitals contain specific regulatory changes and other nuances not touched on in the “big picture” points mentioned above. The full text of the new regulations can be found at:

Charitable hospitals may lawfully bill for and collect funds they are owed for patient care. However, the new rules and regulations in this area mean hospital leadership and experienced legal counsel should closely review all related policies, procedures, and facility practices to ensure all billing and  collection policies and practices fully comply with the law.


Tax Issues in Divorce: Real Estate Itemization Credits

Stark and Stark Attorneys at Law

With the April 15th tax filing deadline quickly approaching, I am beginning to see an increase of the tax-related issues arise in my client’s cases.  The right of either of the parties to claim itemized deductions associated with the real estate taxes and mortgage interest paid on the marital residence is a frequent issue of contention.

It is important to first understand that if you were divorced in the early part of 2015 and filing under a “married, filed jointly” designation for the 2014 tax year, by default, you are sharing in the itemized deduction with your spouse due to the joint filing.  From a practicality standpoint, many divorced couples that file their last joint tax return together reach an agreement to equally split any tax refund or liability associated with their joint filing.

With a “married, filing separately” or “individual” tax filing designation, it is important to come to an agreement with your spouse or ex-spouse regarding the itemized deductions associated with the marital residence.  As the combined deduction between yourself and your spouse cannot exceed the actual interests or taxes paid in a tax year, getting ahead of the issue and reaching an agreement prior to either party’s tax filing is extremely important.

For successfully navigating this issue, I recommend that you consider the following three points:

How much did either party pay towards the mortgage interest and real estate taxes

With the overwhelming number of divorce matters settling by private agreement, it is important to take into consideration the financial obligations under the controlling agreement.  For example, if a party is behind on child support support or failed to make timely mortgage payments, they should not receive the tax benefit of claiming 50% of the mortgage interest or real estate tax deductions.

It is also common for the parties to pay a disproportionate amount towards the monthly mortgage/tax obligation due to either a greater income level or private agreement.  In these scenarios, I often find it useful for the parties to split the itemized deduction in direct proportion to the amount paid.

Balancing out the real estate tax deductions with other tax-related benefits.

Many parties often overlook the benefit of trading off real estate tax deductions with other tax-related benefits such as claiming the children as dependants, charity deductions or medical expenses.  If the goal is to equalize tax credits to both parties in a divorce litigation, applying other deductions or credits to one party may assist the parties in achieving their tax credit equalization plan.

Maximize your tax benefit by speaking with a qualified tax professional.

The goal of applying any itemized deduction is to reduce your adjusted gross income (AGI) by as much as possible.  As there may be scenarios in which it is beneficial from a tax standpoint for one spouse to claim the majority of the mortgage interest deduction, it is very important that you engage a qualified tax professional to maximize the tax benefit to both parties in the divorce process.  Similar to my previous point, if one spouse benefits from taking a disproportionate amount of the real estate itemizations, there are other available remedies to ensure that the other party receives similar tax benefits, such as, claiming children as dependants and/or a uneven distribution of the charity donations.etc.


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