IRS releases proposed regulations for new tax-exemption rules


The IRS has released proposed regulations for implementing the new tax-exemption rules stemming from the Accountable Care Act (ACA). Among the significant provisions are those associated with the requirement that patients who qualify for a hospital's financial assistance program (FAP) be protected from "extraordinary collection action."  The ACA requires the establishment of a standard charge--the amount generally billed-to such patients eligible under the organization's FAP--not  necessarily based on the hospital's regular fee schedule (this could be many times more than what any insurer actually pays and can result in poor or poorly insured patients being charged dramatically more than someone who has good coverage).

The regulations permit two methods to determine the amount generally billed: 1) a "look back" method based on receipts for patients covered by Medicare or Medicare and other insurance combined for the previous year, divided by the gross charge(s) under the hospital's regular fee schedule for those patients' services.; or, 2) a prospective Medicare method, which looks at what Medicare would have paid for the service(s) if it had been billed to Medicare. An election to use one or the other is generally permanent and the calculation must be disclosed to the public.

Comments and requests for a public hearing on the IRS proposed regulations must be received by September 24th, 2012.


Categories