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New legislation limits how nonprofit hospitals collect fees

Updated on January 12, 2015

Low-income hospital patients are receiving a late Christmas present from the Obama Administration, which recently passed legislation limiting the bill collection tactics nonprofit hospitals may use on patients who need financial assistance. The bill also forces these hospitals to offer discounts, free care or other financial assistance to certain needy patients, The New York Times reports.

On Dec. 31, 2014, the Internal Revenue Service and Treasury Department published the final Affordable Care Act requirements that are implemented against hospitals seeking nonprofit tax exemption, which is about 60 percent of hospitals nationwide, the Times reports. The rules went into effect on December, 29.

The new rules eliminate billing practices that target low-income patients who can easily go bankrupt over healthcare costs, and who are often forced to pay much higher costs for medical treatment than insured patients. Hospitals that want to keep or achieve a nonprofit status can no longer charge patients who are eligible for financial assistance and receive emergency treatment or other necessary care more than the amount generally billed to patients who have Medicaid, Medicare or private insurance.

Additionally, the legislation clarifies several broadly defined provisions of the Affordable Care Act, including the definitions of emergency or necessary care, amounts generally billed, and “each nonprofit hospital must establish and publicize a written policy stating who is eligible for financial assistance and how people can apply,” the Times reports.

The implementation of these rules helps distinguish nonprofit hospitals from their for-profit counterparts, which until now had murky differences.

Defining what type of care low-income patients are receiving dictates whether recipients fall under the new rules and what discounts they are eligible for. This information in the ACA is ambiguous, but the new legislation now has clearly defined, actionable details.

“A hospital can limit its definition of medically necessary care to care that is considered medically necessary by the state's Medicaid program,” according to an analysis by JD Supra. “Or, the hospital could simply define medically necessary care as care that is consistent with generally accepted standards of medicine in the community, or to an examining physician's determination.”

Additionally, the recently enacted laws state that each nonprofit hospital must assess the health needs of its community at least once every three years, including translating the information from the hospital’s financial assistance program into the primary language of any low-English proficiency populations that constitute more than five percent of the members of the community served by the hospital or 1,000 individuals, whichever is less, JD Supra reports.

Hospitals that fail accomplishing these requirements are liable to a $50,000 tax penalty.

The collection methods hospitals go through can often leave low-income patients with few options to pay for services rendered. Negotiating with the hospital, filing bankruptcy and defaulting are often the only choices. When an agreement isn’t met, hospitals often go to court to collect unpaid bills, and the hospital almost always win by default because the basic facts are not disputed: A patient received care and the hospital provided said treatment, the Times reports.

In the legislation, the Obama administration has said the new plan should alleviate some of the burdens the poor face when receiving necessary medical care and keep debt collectors off their backs.

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