1804-2655696 - Section 501 (R) - v2 - 4.16.18

501(r) compliance challenges and
IRS 501(r) audit activity

April 19, 2018
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Page 2 501(r) compliance challenges and IRS 501(r) audit activity

Presenters
► Stephen Clarke
Executive Director, Ernst & Young LLP
Washington, DC
► Diane Bean
Senior Manager, Ernst & Young LLP
Columbus, OH
► Julie Sparks
Senior Manager, Ernst & Young LLP
Cincinnati, OH
► Erica Yike
Manager, Ernst & Young LLP
Cleveland, OH

Agenda
► 501(r) overview
► Community health needs assessment
► Financial assistance policy
► Limitations on charges
► Billing and collection requirements
► Schedule H implications
► 501(r) implementation issues and challenges
► 501(r) exam activity and audit techniques
► Avoiding and preparing for a 501(r) exam

501(r) overview

501(r) background
► Section 9007 of the Affordable Care Act created new rules for charitable
hospitals:
► Added Internal Revenue Code Section 501(r)
► Community health needs assessment (CHNA)
► Financial assistance policy (FAP) and emergency medical care policy
► Limitations on charges
► Billing and collections
► Final 501(r) regulations were released December 29, 2014:
► Effective/applicability date for most provisions of final regulations: tax years
beginning after December 29, 2015
► It requires the Internal Revenue Service (IRS) to review at least once every
three years the community benefit activities of each charitable hospital
organization.
► It requires the IRS, with the US Department of Health and Human Services, to
submit reports to Congress comparing attributes of taxable, tax-exempt and
government hospitals.

Hospital facilities
► A hospital organization that operates a hospital facility must ensure

that the facility meets each Section 501(r) requirement.
► According to Treas. Regs. 1.501(r)-1(b)(17), a hospital facility is “a
facility that is required by a state to be licensed, registered or similarly
recognized as a hospital” and includes:
► Hospital facilities operated through a disregarded entity
► Multiple buildings under one state license (i.e., a single
hospital facility)
► The preamble to the final regulations (the Preamble) clarifies that
operations in a single building under more than one state license
constitute multiple hospital facilities.

Partnerships
► General rule – A hospital organization “operates” a

hospital facility if it owns a capital or profits interest in an
entity treated as a partnership for federal tax purposes
(e.g., joint venture, LLC) that operates the facility, directly
or indirectly.
► Indirect ownership: general rule applies to interests owned
indirectly through one or more lower-tier entities treated as
partnerships.
► The governing body of a partnership or disregarded entity
is an “authorized body” of its hospital facility.
► A committee of such a governing body is also an authorized body
to the extent permitted under state law.

Instances in which a hospital organization
does not have to meet Section 501(r)
► Unrelated trade or business: The final regulations clarify that a
hospital organization does not have to meet the requirements of
Section 501(r) with respect to any activities that constitute an
unrelated trade or business described in Section 513 with respect to
the hospital organization.
► Including operation of a hospital facility through a partnership
► Corporations (physicians’ practices): The Preamble clarifies that a
hospital facility does not have to meet the requirements of Section
501(r) with respect to taxable corporations (e.g., physicians’
practices) that provide care in the facility, even if the corporation is
wholly or partially owned by the hospital organization, because
Section 501(r) does not apply to the entity.
► Same rationale would apply to tax-exempt corporations that provide care
in the facility but do not operate their own hospital facility.

Community Health Needs Assessment
(CHNA)

CHNA: defining community served and
assessing community health needs
► To conduct a CHNA, a hospital facility must:
► Define the community served, taking into account all the relevant facts and
circumstances
► Regulations provide flexibility in how facility defines its community.
► The facility must describe in CHNA report how community was defined.
► Identify and prioritize significant health needs of the community
► Solicit and take into account input from persons representing the broad interests of
its community, including all of the following:
► At least one public health department or State Office of Rural Health with knowledge or
expertise relevant to the community’s health needs
► Medically underserved, low-income and minority populations
► Written comments on its most recent CHNA and implementation strategy
► CHNA report must include an evaluation of the impact of any actions the
facility has taken to address the significant health needs identified in its prior
CHNAs.
► Documentation is key.

CHNA
Implementation strategy
► An authorized body must adopt an implementation strategy by the 15th day of

the 5th month after the end of the taxable year during which the hospital
facility conducts the CHNA.
► The implementation strategy is required to:
► Describe actions the hospital facility intends to take to address each significant
health need identified in the CHNA and the anticipated impact of those actions or
identify the health need as one it does not intend to address and explain why
► Identify the resources the hospital facility plans to commit to the health need
► Describe any planned collaboration with other facilities or organizations in
addressing the health need
► The hospital facility generally must document its implementation strategy in a
separate written plan tailored to the particular hospital facility, taking into
account its specific programs and resources.
► The facility may adopt a joint implementation strategy if it adopted a joint
CHNA report.

Financial Assistance Policy (FAP)

FAP regulations – Section 1.501(r)(4)
► Each hospital facility must establish a written FAP that

applies to all emergency and other medically necessary care
it provides.
► Hospitals have flexibility to define “medically necessary care.”
► The FAP must describe the method used to determine amounts
generally billed (AGB) and how the AGB percentage was calculated
or refer to another document that includes this information.
► If another document is referred to, that document must be translated into
limited English proficiency (LEP) languages and made widely available.
► The FAP must describe collections actions that can be taken for
nonpayment or refer to a separate billing and collections policy that
includes this information.

FAP – listing of outside providers
► The FAP must list providers other than the hospital facility that deliver
emergency or other medically necessary care in the facility, as well as
providers that are and are not covered under the FAP.
► Notice 2015-46:
► List may include name of practice group rather than each doctor in
practice group.
► List may reference department or type of service if all care in that
department or type of service is or is not covered by the FAP.
► List may be maintained in document outside of FAP if FAP explains how
members of public may obtain it free of charge, online and on paper.
► Updates may be made to list without governing body approval.
► Updates must be made at least quarterly to correct “minor errors
or omissions.”

FAP – LEP accessibility and translation
► The FAP, FAP application form and plain language summary must be
available in English and in any other language in which LEP
populations comprise the lesser of 1,000 individuals or 5% of:
► The community served by the hospital
Or
► The population likely to be affected or encountered by the hospital facility
► Rationale: Any reasonable method may be used to determine
numbers and percentages.
► Regulations provide flexibility in how a facility defines its community.
► Not required to be identical to community for CHNA purposes
► Regulations provide flexibility in how a facility defines what constitutes
an LEP population.

FAP – LEP accessibility and translation
► Translations of FAP documents in LEP languages must also be made

widely available and regularly updated.
► They must be placed on website and made available on paper, upon
request.
► Provider list also must be regularly updated in LEP languages.
► Other documents that must be translated into LEP languages and
made widely available include:
► Document describing method used to determine AGB and how AGB
percentage was calculated, if that information is not included in FAP
► Billing and collections policy or other document that describes collections
actions that can be taken for nonpayment, if this information is not
included in FAP

Polling question
Into how many languages has your hospital or health system

translated its financial assistance policy?
A. 0
B. 1–3
C. 4–6
D. 7–10
E. More than 10
F. Not applicable (EY participant)

Widely publicizing the FAP
► A hospital facility must:

► Make its FAP, FAP application and plain language summary widely available and
conspicuously placed on a website at all times and in all LEP languages requiring
translation
► Inform and notify visitors of the FAP through “conspicuous” public displays,
including in emergency rooms and admissions areas
► Make its FAP, FAP application and plain language summary available upon
request (by mail and in public locations in facility)
► Inform and notify residents of the community served likely to require financial
assistance about the FAP
► Not just through facility’s website
► May contact community groups representing low-income persons
► Thoroughly document specific efforts made to do so
► Offer (though not necessarily provide) a plain language summary of the FAP to
patients as part of the intake or discharge process
► Include conspicuous notice on all bills regarding FAP application

Emergency medical care policy
► A hospital facility must provide care, without discrimination, for

emergency medical conditions to individuals whether or not they are
FAP-eligible.
► An emergency medical care policy must prohibit the hospital facility
from engaging in actions that discourage individuals from seeking
emergency medical care, including:
► Demanding payment before providing treatment
► Permitting debt collection activities that interfere with provision of
emergency medical care
► An emergency medical care policy may be included in the same
document as the FAP or Emergency Medical Treatment and Labor
Act policy.

Establishing policies
► A FAP, a separate billing and collections policy (if applicable) and an

emergency medical care policy must be adopted by an “authorized body” of
the hospital facility.
► Governing body of the hospital organization
► Committee of the governing body
► Other parties authorized by governing body to act on its behalf if permitted by state
law to do so
► Timing issues: The board of directors must have sufficient time to review and
approve policies by the first day of the 2016 tax year.
► Ensure staff has appropriate time to begin implementing policies
► Multiple hospital facilities may share identical policies.
► If accurate for each hospital facility and if any joint policy states that it is applicable
to each hospital facility
► May require multiple governing bodies to approve

Limitations on charges

Limitations on charges regulations
Section 1.501(r)(5) – general rules
► A hospital facility must limit the amounts charged to any FAP-eligible

individual for emergency or other medically necessary care covered under the
FAP to not more than the amounts generally billed to individuals who have
insurance covering such care.
► The amount “charged” includes the amount an FAP-eligible individual is
personally responsible for paying, after all deductions and discounts
(including those under the FAP) and less any amounts reimbursed by
insurers.
► Regardless of whether or when full amount allowed is actually paid
► There are two methods for determining AGB – look-back and prospective.
► Look-back numerator should include both amounts insurer will pay or reimburse
and amount (if any) individual is personally responsible for paying (e.g., co-
payments, co-insurance, deductibles)
► Denominator: the sum of the associated gross charges for those claims

Limitations on charges
Look-back method
► Under the look-back method, the AGB percentage may be:

► One average percentage of gross charges for all care, or for all emergency and
other medically necessary care, provided by the hospital facility
Or
► Multiple AGB percentages for separate categories of care or for separate items
or services
► Hospital facilities covered under the same Medicare provider agreement may
calculate their AGB percentage(s) based on all claims and gross charges for
all such facilities and apply such percentage(s) across all such facilities.
► Start date: Facility must begin using its AGB percentage by the 120th day
after the end of the 12-month period for which it is calculated.
► Must calculate AGB percentage at least annually
► May recalculate AGB percentage at any time, but also must update FAP

Polling question
Which method has your organization selected to determine

amounts generally billed for emergency or other medically
necessary care?
A. Look-back method (Medicare-fee-for-service and all
private insurers)
B. Look-back method (Other)
C. Prospective method
D. Don’t know
E. Does not apply

Billing and collection requirements

Regulations Section 1.501(r)(6) – general rules
► A hospital facility may not engage in extraordinary collection actions

(ECAs) against an individual, or another individual responsible for
payment of the individual’s bill for hospital care, before making
“reasonable efforts” to determine the individual’s eligibility under the
FAP. ECAs include actions that:
► Involve selling an individual’s debt
► Involve reporting adverse information about an individual to consumer
credit reporting agencies or credit bureaus
► Require a legal or judicial process
► Require payment on past unpaid bills for FAP-related care before
providing medically necessary care – “defer or denial ECA”
► Applies to any ECAs taken by:
► Any purchaser of the individual’s debt
► Any debt collection agency to which the facility referred the debt

Reasonable efforts
► “Reasonable efforts” to determine whether an individual is FAP-eligible

include notifying the individual about FAP and refraining from initiating ECAs
during a “notification period.”
► Notification period begins on the date the facility provided the first post-discharge
billing statement and ends 120 days later
► Must provide at least one written notice to the individual disclosing:
► That financial assistance is available for eligible individuals
► ECAs the facility intends to initiate against the individual
► Deadline after which such ECAs may be initiated (no earlier than 30 days after the date of the notice
or 120 days after the first post-discharge billing statement, whichever is later)
► Multiple notices may be required
► Must provide a plain language summary of the FAP with the above notice
► Must make a reasonable effort to orally notify individual about the FAP and about
how he or she may obtain assistance with the application process
► No need to actually notify individual orally
► Need to document efforts to orally notify

Timeline of Section 501(r) notification to satisfy
“reasonable efforts” before initiating ECAs
Notification period
30-day notice Possible extension
of ECAs of notification period
Day 120
Ends: generally 120 days after
Day 90 first post-discharge billing
statement, unless 30-day
Day 0 notice was not sent timely
Start of first End of
First date post-discharge notification
of care billing statement period
Ends: generally 240 days after
Day 0 Day 120 first post-discharge billing
statement, unless 30-day
Day 210 notice was not sent timely
Day 240
Application period 30-day notice of Possible extension of

FAP items and application period
intended ECAs required

Schedule H implications

► Regs. Sec. 1.6033-2 requires hospitals include in Schedule H:

► A copy of or link to facility’s most recent implementation strategy
► Description of actions taken during the year to address significant health
needs identified through its most recently conducted CHNA
► The Preamble to final Section 501(r) regulations states that discounts
outside the FAP will not be considered community benefit reportable
on Schedule H.
► A facility may not want to include certain discounts (e.g., prompt pay, self-
pay, out-of-state) in its FAP because this would trigger AGB limitations
under Section 501(r).
► But if a discount is not included in its FAP, hospital may not be able to
report that discount as financial assistance in Schedule H, Part I.
► Dual status (government entity and Section 501(c)(3)) hospitals are
not required to file Forms 990 and, therefore, are exempted from new
Sec. 6033 regulations.

► The expenses to meet any need described in the CHNA may be

reported as community health improvement service expense in
Schedule H.
► Section 501(r) regulations expand the definition of health needs to include
the need to address social, behavioral and environmental factors that
influence community health (e.g., community building).
► The Preamble notes that hospitals are responsible for maintaining
records to substantiate any Section 501(r)-related information they
report on Schedule H.

501(r) implementation issues and challenges

501(r) compliance challenges
► CHNA – community input:

► Soliciting and taking into account written comments received on
the hospital facility’s most recently conducted CHNA and
implementation strategy
► If the CHNA report does not contain a specific discussion of how this
was done, it will not have met this requirement.
► Identifying and prioritizing significant health needs
► If the CHNA report does not specifically describe how the facility
gathered and used the input it received to both identify and prioritize
significant health needs, it will not have met this requirement.
► Note – the IRS reviews the community benefit activities of
every hospital once every three years and may review the
CHNA report.

► Implementation strategy:
► Joint implementation strategies that include multiple hospital
facilities must clearly identify each facility’s particular role and
responsibilities in addressing significant health needs in
the community.
► Must also identify the resources each facility plans to commit to
addressing health needs
► Must also include a summary or other tool that helps the reader to
easily locate those portions of the implementation strategy that relate
to each facility

► FAP:
► Specific eligibility criteria for all types of financial assistance in FAP
should be included in the FAP.
► If assets are taken into account in determining FAP eligibility, the FAP
should specify asset eligibility limits for each type of financial
assistance.
► Medical indigence and hardship eligibility criteria should be specified,
rather than being purely discretionary based on facts and
circumstances.
► If the eligibility criteria for financial assistance are discussed in various
sections of the FAP, consider consolidating them.

► FAP:
► Notifying and informing members of the community who are most
likely to require financial assistance about the FAP
► Translating FAP, plain language summary and FAP application into
languages of limited English proficient populations in the
community that exceed 1,000 person threshold
► Preparing and making widely available a list of non-employed
providers of medically necessary care in the hospital facility,
including whether they are covered by the FAP
► Must be either listed in the FAP or may be separate from the FAP as
long as the FAP references the list and how it may be obtained
► Must also be widely publicized

► FAP:
► Describing in FAP (or separate document referenced in FAP)
actions that may be taken for non-payment, and time frame and
reasonable efforts that the hospital facility will take before
engaging in extraordinary collection actions (ECAs)
► If the information is contained in a separate billing and collections
policy, that policy must:
► Describe actions that may be taken for non-payment, and the time frame
and reasonable efforts the facility will take before engaging in ECAs
► Be translated into the same limited English proficient languages as the FAP
must be translated into
► Be widely publicized

► FAP:
► Describing amounts generally billed (AGB) method (and, if look-
back, calculation of AGB percentage) in FAP or another document
referenced by FAP
► Even if a hospital facility provides 100% free care to FAP-eligible
patients, it is still required to select an AGB method.
► If this AGB information is contained in a separate document, that
document must be widely publicized and translated into the same
limited English proficient languages as the FAP must be translated
into.

► AGB:
► Establishing that deposit/prepayment amounts for services are
less than AGB for that particular service, if the patient is FAP-
eligible or the patient’s FAP eligibility has not yet been determined
► The hospital facility should confirm that any prepayments or deposits it
requires are below the AGB for that care, so that if a patient is later
determined to be FAP-eligible, the facility can refund the amounts that
exceed what the patient is determined to owe as a FAP-eligible
individual without violating the 501(r) limitation on charges provisions.

► AGB:
► Refunding amounts paid by FAP-eligible patients that exceed
amounts that the hospital determines such patients are
responsible for paying
► Hospital facilities should check both open and closed accounts of
persons determined eligible for financial assistance and refund any
excess amounts paid for the periods during which they were FAP-
eligible.

► Billing and collections:

► Confirming that agreements with third-party collection agencies
require compliance with 501(r) reasonable effort requirements
before the third party engages in ECAs
► Agreements must be reasonably designed to prevent ECAs from being
taken to obtain payment until the third party has made reasonable
efforts to determine individuals’ FAP eligibility.
► Agreements must include specific provisions regarding suspension
and reversal of ECAs.
► Merely stating the third party must comply with 501(r), without
specifying the requirements, may not be sufficient.
► Ensuring no ECAs are taken until after expiration of notification
period

► General:
► Authorized body adoption of FAP, CHNA report, implementation
strategy, emergency medical policy and, if applicable, billing and
collections policy
► Developing and implementing procedures for overseeing 501(r)
compliance and detecting/correcting/disclosing 501(r) violations
► Ensuring that each policy clearly names each facility to which the
policy applies

website posting and translation
► The following documents need to be available on a website and
translated:
► FAP
► Plain language summary (PLS)
► FAP application
► AGB methodology, calculation and percentages (if separate from the FAP)
► Collection actions that may be taken to obtain payment of a bill for medical
care (if separate from the FAP)
► List of providers (if separate from the FAP) (see Notice 2015-46)
► The above also needs to be available upon request as paper copies
by mail and in public locations in the hospital:
► Train patient-facing staff to provide copies of these documents and to
inform the public where a copy of the CHNA report may be found.

FAP eligibility timing, refunds
► How far back does eligibility determination go?

► How far back does refunding of amounts paid have to go?
► Can the FAP provide for discounts that are reduced by
amounts already paid?
► Can a FAP provide that only open balances are eligible for
financial assistance?
► Has Revenue Cycle established an automated process to
ensure that if FAP-eligible patients were charged more
than AGB or their FAP-eligible discounted amount for
care, the excess payment is refunded?

Polling question
What area of 501(r) requirements has been most challenging

for your organization to comply with?
A. Community health needs assessments
B. Financial assistance policy
C. Billing and collections
D. Amounts generally billed
E. Not applicable

501(r) exam activity and audit techniques

501(r) exam activity
► Reviews:
► IRS TE/GE EO Exam reviews approximately 1,000 tax-exempt hospitals
each year for community benefit and 501(r) compliance
► Reviews each hospital’s Schedule H, website, and other publicly available
information on the internet
► Currently reviewing 2015 and 2016 tax years
► Exam referrals:
► In FY17, the IRS conducted 1,193 501(r) exams.
► In FY17, the IRS referred close to 400 hospitals for field examination.
► Common exam triggers
► No CHNA report or implementation strategy on website
► No FAP — or incomplete FAP — on website
► No provider list — or incomplete list — in FAP or on website
► 33 $50,000 excise taxes on CHNA violations assessed to date

501(r) exam activity
► LTR 201731014 — Recent revocation of “dual status” hospital

► First instance of 501(c)(3) revocation for failure to comply with Section
501(r)
► Dual status entity — governmental and exempt under 501(c)(3)
► Basis for revocation was the willful failure to:
► Conduct a CHNA that complied with 501(r)
► Make a CHNA widely available to the public
► Adopt an implementation strategy
► Hospital indicated it was a small, rural facility without resources to comply,
and that it “really did not need, actually have any use for, or want their tax-
exempt status under 501(c)(3).”
► Key takeaways: the lack of an implementation strategy and failure to post
the CHNA on a website were considered egregious and not subject to
forgiveness under Rev. Proc. 2015-21.

IRS 501(r) audit techniques
► IRS 501(r) audit techniques training module: a guide and basic road
map, not a comprehensive audit manual for agents
► Request assistance, if needed, from IRS Tax Exempt and
Government Entities Division Counsel and IRS intranet sites (e.g.,
Knowledge Network)
► If 501(r) violation is detected, determine whether error is minor:
► If not minor, was it corrected and disclosed properly so as to avoid
revocation and noncompliant facility income tax?
► If not disclosed and corrected, the IRS can impose tax and/or revoke
exemption.

IRS 501(r) audit techniques
► Scope may be expanded beyond 501(r) issues by either ACA Review

Group or exam agent
► The cases referred to exam may have issues other than 501(r) identified,
such as UBI.
► Cases referred to exam are intended to be “worked as single-issue or
limited-scope” exams, but the agent has discretion to expand the scope
beyond issues being referred.
► Governmental (“dual status”) hospitals recognized as tax-exempt
under Section 501(c)(3)
► Subject to 501(r) requirements while recognized as 501(c)(3)
► May voluntarily terminate 501(c)(3) status under Rev. Proc. 2017-5 and
would no longer be subject to 501(r) going forward (but would have
compliance obligations for prior years)

Polling question
Do you know if any hospitals in your area that have been

audited or received a notice from the IRS regarding 501(r)
compliance?
A. No
B. Yes
C. Does not apply

Avoiding and preparing for a 501(r) exam

Avoiding and preparing for a 501(r) exam
► To avoid an exam, make sure all publicly available

documents (Schedule H, FAP, CHNA report, other
documents required to be placed on website) demonstrate
compliance with final 501(r) regulations
► To prepare for an exam, do an internal check for
compliance with:
► Final regulations for tax years beginning in or after 2016
► Statute for tax years beginning before 2016:
► Because the IRS is asking about compliance with final regulations in
years beginning before 2016, a hospital will be in the best position if
it also checks compliance with final (or proposed) regulations in these
years.

Mitigating risks associated with 501(r)
noncompliance — IRS 501(r) penalty chart
Tax-exempt
501(c)(3) 4959 Noncompliant facility Subject to Subject to bonds
Issue revocation? excise tax? income tax? correction? disclosure? revoked?
Minor errors and N N N Y N N
omissions (non-
failures)
Failures that are N Y N (if corrected and Y Y N
neither willful nor disclosed)
egregious
(excused failures)
All other failures Maybe Y Maybe N N Maybe
(willful or
egregious)

Planning for failure or failure to plan?
► Some 501(r) noncompliance is inevitable, but the

consequences of noncompliance can be mitigated.
► Worst-case scenarios can include:
► Revocation of the organization’s tax-exempt status
► A facility becoming temporarily taxable
► $50,000 excise tax for CHNA-related failures
► Two paths to forgiveness:
► Some minor omissions and errors may not be considered failures.
► Larger failures may be “excused” for some purposes.
► To use either path, hospitals should plan ahead.

Polling Question
Does your hospital/hospital system have a plan in place for

monitoring 501(r) compliance, correcting noncompliance,
and disclosing noncompliance and correction?
A. Yes
B. No
C. Not applicable

Minor omissions and errors
► Regulations state that an omission or error will not be

considered a “failure” if:
► The omission or error was minor and either inadvertent or due to
reasonable cause
► The hospital facility promptly corrects the omission or error
► Such correction must include establishing (or reviewing and revising)
hospital practices designed to facilitate overall 501(r) compliance.
► If a hospital has practices in place that are designed to
promote overall 501(r) compliance, this indicates an
omission or error is due to reasonable cause.
► There are examples in Rev. Proc. 2015-21.

Excusing failures using Rev. Proc. 2015-21
► Where the exception for minor errors does not apply, a

failure that is neither willful nor egregious will be excused
for certain purposes if the facility:
► Promptly corrects the failure
► Makes proper disclosure on Schedule H for the year in which the
failure was discovered
► Part of correction involves establishing practices to
promote compliance with 501(r) or, if practices exist,
determining if changes to them should be made and
implementing such changes.
► Failures are excused only for 501(r)(1) sanctions
(revocation of exemption or taxation of facility income),
not for the 4959 excise tax on CHNA failures.
Excusing failures using Rev. Proc. 2015-21
► Schedule H disclosure must include a detailed description

of the failure and correction made, including:
► Type, cause, place, date of failure and discovery, number of
occurrences
► Estimate of number of persons affected and dollar amounts involved
► The date and method of correction
► How persons affected by the failure were restored to their prior
position
► Description of any practices and procedures that hospital facility
revised
► As part of correction, the facility must establish/review
practices or procedures reasonably designed to prevent
recurrence of error/omission

Failures and correction takeaways
► To avoid or minimize penalties, hospitals should confirm

that they have excellent documentation of practices and
procedures.
► A hospital facility should promptly correct all errors and
omissions that may constitute noncompliance with 501(r).
► If an error or omission is not clearly both minor and either
inadvertent or due to reasonable cause, a hospital facility
should promptly correct it and disclose it.

Questions?

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1804-2655696
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1804-2655696 - Section 501 (R) - v2 - 4.16.18

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501(r) compliance challenges and

IRS 501(r) audit activity

Page 2 501(r) compliance challenges and IRS 501(r) audit activity

Page 3 501(r) compliance challenges and IRS 501(r) audit activity

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Page 6 501(r) compliance challenges and IRS 501(r) audit activity

► A hospital organization that operates a hospital facility must ensure

Page 7 501(r) compliance challenges and IRS 501(r) audit activity

► General rule – A hospital organization “operates” a

Page 8 501(r) compliance challenges and IRS 501(r) audit activity

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Page 10 501(r) compliance challenges and IRS 501(r) audit activity

Page 11 501(r) compliance challenges and IRS 501(r) audit activity

► An authorized body must adopt an implementation strategy by the 15th day of

Page 12 501(r) compliance challenges and IRS 501(r) audit activity

Page 13 501(r) compliance challenges and IRS 501(r) audit activity

► Each hospital facility must establish a written FAP that

Page 14 501(r) compliance challenges and IRS 501(r) audit activity

Page 15 501(r) compliance challenges and IRS 501(r) audit activity

Page 16 501(r) compliance challenges and IRS 501(r) audit activity

► Translations of FAP documents in LEP languages must also be made

Page 17 501(r) compliance challenges and IRS 501(r) audit activity

Into how many languages has your hospital or health system

Page 18 501(r) compliance challenges and IRS 501(r) audit activity

► A hospital facility must:

Page 19 501(r) compliance challenges and IRS 501(r) audit activity

► A hospital facility must provide care, without discrimination, for

Page 20 501(r) compliance challenges and IRS 501(r) audit activity

► A FAP, a separate billing and collections policy (if applicable) and an

Page 21 501(r) compliance challenges and IRS 501(r) audit activity

Page 22 501(r) compliance challenges and IRS 501(r) audit activity

► A hospital facility must limit the amounts charged to any FAP-eligible

Page 23 501(r) compliance challenges and IRS 501(r) audit activity

► Under the look-back method, the AGB percentage may be:

Page 24 501(r) compliance challenges and IRS 501(r) audit activity

Which method has your organization selected to determine

Page 25 501(r) compliance challenges and IRS 501(r) audit activity

Page 26 501(r) compliance challenges and IRS 501(r) audit activity

► A hospital facility may not engage in extraordinary collection actions

Page 27 501(r) compliance challenges and IRS 501(r) audit activity

► “Reasonable efforts” to determine whether an individual is FAP-eligible

Page 28 501(r) compliance challenges and IRS 501(r) audit activity

Application period 30-day notice of Possible extension of

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Page 30 501(r) compliance challenges and IRS 501(r) audit activity

► Regs. Sec. 1.6033-2 requires hospitals include in Schedule H:

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► The expenses to meet any need described in the CHNA may be

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Page 33 501(r) compliance challenges and IRS 501(r) audit activity

► CHNA – community input:

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► Billing and collections:

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