It is certainly an understatement to say that health care reform has been in the news in Idaho lately. The 2013 Legislature passed legislation adopting an Idaho-based health insurance exchange. The Idaho health insurance exchange, called Your Health Idaho, has been established and is working toward the federally mandated Oct. 1 enrollment date. The potential expansion of Idaho’s Medicaid program was discussed during the 2013 legislative session, and it probably will be discussed again in 2014.
As most businesses know, many of the health care services and most of the hospital services in the Treasure Valley are provided by nonprofit corporations that are recognized as tax-exempt by the Internal Revenue Service. Under the Internal Revenue Code, these entities must have been established for a charitable purpose and are duty-bound to carry out charitable functions. These entities do not pay federal income taxes and are exempt from many state and local taxes.
An “under-the-radar” issue relating to health care reform of which Idaho businesses should be aware is that some of their health care dollars are being spent for charitable purposes. The Patient Protection and Affordable Care Act requires tax-exempt hospitals to publish, in detail, their efforts to provide charitable care and educational services.
Under the act, Idaho’s tax-exempt hospitals are now required to enact and implement policies that require the hospital to conduct and publish a community needs assessment every three years, that describe and publicize the hospital’s financial assistance policy, that limit the amounts hospitals may charge to those receiving financial assistance, and that limit the hospital’s collection efforts in certain circumstances.
Community needs assessment
Tax-exempt hospitals must now conduct a community needs assessment at least every three taxable years and then implement a strategy to meet the community needs identified in the assessment. The community needs assessment must take into account input from a broad representation of the interests of the community served by the hospital, including those with knowledge or expertise in public health. The results of the community needs assessment must be made widely available to the public. The failure to conduct a community health needs assessment can result in an excise tax penalty of $50,000.
In a recent example available online, one of the Treasure Valley’s hospital systems published its Community Benefit Report for 2012 and described its combined $40 million of costs incurred that year for charity care to those in need, unreimbursed costs of Medicaid and public programs for low-income individuals and families, and expenditures on community benefit programs.
Financial assistance policy
PPACA requires that tax-exempt hospitals adopt, implement and widely publicize a written financial assistance policy. The policy must indicate the eligibility criteria for patients to receive financial assistance and whether the assistance includes free or discounted care. In addition, the policy must include the basis for calculating amounts charged to patients under the policy, the process for applying for financial assistance and, in the case of organizations without separate billing and collections policies, the actions that the hospital may take if the patient does not pay. Hospitals must also adopt a written policy requiring the hospital to provide, without discrimination, emergency medical care to individuals regardless of their ability to pay.
Limitations on charges
Tax-exempt hospitals must now charge patients who are eligible for financial assistance the same amounts billed to patients who have insurance that covers the care provided by the hospital. The hospital may not use gross charges when billing individuals who qualify for financial assistance.
Billing and collection practices
Under PPACA, tax-exempt hospitals must refrain from extraordinary collection actions, even if otherwise permitted by law, against an individual without first making reasonable efforts to determine whether the person is eligible for financial assistance under the hospital’s financial assistance policy.
Mortell is a partner at Hawley Troxell and chairman of the firm’s health law practice group. He can be reached at email@example.com.