Now that the 2011 tax season is officially over, health care organizations barely have time to take a breath before they must begin preparing for 2012.
The IRS already has enacted numerous changes to the way not-for-profit hospitals handle their account receivables as part of the Patient Protection and Affordable Care Act of 2010. As the overhaul of the United States health care system continues to chug along, this coming tax year brings two changes that will affect how health care organizations manage their accounts receivable processes and reporting.
Tax changes past
Change has been a constant for not-for-profit hospitals since passage of the Affordable Care Act. To give the legislation teeth, Congress turned to the Internal Revenue Service to police changes, especially those that pertain to patient finances, charity care, bad debt, and collections.
In that first year the IRS required non-profit hospitals to codify their policies on how they determine and provide financial assistance to patients. Hospitals were also mandated to standardize their pricing so that those patients who needed financial assistance were charged the same rates as those with insurance.
The IRS also required tax-exempt hospitals to refrain from “extraordinary” collection practices until it could “reasonably” determine that a patient did or did not qualify for financial assistance. “The IRS is very interested in any bad billing and collections policies,” says Elizabeth Solecki, a tax principal at the accounting firm Blum Shapiro. Not-for-profit hospitals must complete Schedule H of Form 990. “It asks for a lot of information about billing and collections that is required to be reported to the IRS and is open to public inspection.”
Any not-for-profit hospital failing to comply with these new regulations faces a $50,000 excise tax and loss of their tax-exempt status. So far, so good, as there have been no reports of the IRS stripping a hospital of its 501(c)(3) status.
The Affordable Care Act also imposed one more requirement of charity hospitals, but because of its complexity, it gave them three years to comply: The Community Health Needs Assessment.