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Proposed 501r Rules and the Use of Charity Screening TX AAHAM June 5, 2014 1.

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Presentation on theme: "Proposed 501r Rules and the Use of Charity Screening TX AAHAM June 5, 2014 1."— Presentation transcript:

1 Proposed 501r Rules and the Use of Charity Screening TX AAHAM June 5, 2014 1

2 Today’s Speakers Debra Stall is a Managing Partner at PARO Teamworks, LLC. PARO Teamworks provides healthcare consulting including revenue cycle redesign, policy and procedure design and restructuring, interim management and financial assistance process redesign. Neil Smithson, Managing Member and Founder, PARO Decision Support, LLC. PARO provides charity screening and revenue cycle scoring solutions to hundreds of hospitals nationwide. PARO has help millions of consumers receive free or discounted care since its inception in 2006. Debra Stall (615) 633-4663 Neil Smithson (954) 530-2442 2

3 Agenda Section 501 r Review Industry Response to New Environment Presumptive Eligibility Safeguards Financial Assistance & Community Needs Opportunities for Improving Processes, Reducing Bad Debt and Bad PR Recommendations for Implementation 3

4 Internal Revenue Code Section 501 r (based on Notice of Proposed Rulemaking issued in June 2012) Establishes the following requirements: Financial assistance policy Limitation on charges Billing and collection practices Community health needs assessment 4

5 Financial Assistance Requirements Written financial assistance policy Criteria for eligibility – income, assets, insurance status Type of assistance provide (i.e. free care, discounted care, medical indigent or hardship) Clearly inform patients of how and where to apply Explain documentation requirements Assistance may not be denied based on omission of documentation not specified in the policy Applicants must be notified in writing of eligibility determination Policy must be approved by the Board or Trustees or another governing body of the tax-exempt hospital Considered implemented when the policy is consistently carried out by the facility 5

6 Limitation on Charges Fees charged to patients eligible for financial assistance must to limited to amounts generally billed those with insurance. Regulations cite specific examples for calculating AGB AGB is applied to all ER care and medically necessary care 6

7 Billing and Collection Policy May stand as a separate policy or be incorporated into the overall financial assistance policy Describe permissible collection actions that may be taken in event of nonpayment and time frame for taking action Applies to both internal hospital collection efforts and efforts undertaken by authorized third parties If a patient is determined to be FAP qualified later in the revenue cycle, the extraordinary collection actions must be reversed 7

8 Extraordinary Collection Actions Extraordinary Collection Actions (ECA)are defined as actions taken by the hospital, or a third party acting on behalf of the hospital, that require legal or judicial process. Hospitals must refrain from taking ECAs throughout the notification period and prior to reasonable efforts to determine eligibility for FAP. They include, but are not limited to the following: Reporting adverse information to credit bureaus Sale of debt to another party Initiating civil litigation Liens on property Foreclosure on real estate Attaching or seizing bank account Causing and Individuals arrest Body attachments Garnishment of wages 8

9 Reasonable Efforts  120 day notification period which begins after issuing the first bill to the patient Hospitals are prohibited from engaging in extraordinary collection actions while making reasonable efforts to determine whether an individual is eligible for assistance under their financial assistance policy. 9

10 Application Period  120 application period, a patient may submit an application. With an incomplete application, the hospital must refrain from collection actions and provide information on what is needed to complete application. 10

11 Efforts to Inform Patients  Distribute plain language summary of policy and offer application prior to discharge  Include summary in at least three billing statements and other written communication during notification period  Inform patient of policy in all oral communication regarding amount of bill due during notification period 11

12 Notice on Collection Action Provide with at least on written notice, a minimum of 30 days prior to deadline specified within notice, informing patient about collection actions that may be taken if patient does not submit application for assistance or pay the outstanding balance 12

13 Presumptive Eligibility Safeguard Presumptive eligibility screening provides hospitals with an important safeguard regarding collection actions and demonstrates effort made to qualify patients for assistance Presumptive eligibility must be extended for the most generous level of financial assistance 13

14 Industry Response in New Environment HFMA/ACA Medical Debt Task Force In January of this year, HFMA and ACA released best practice guidelines for fair resolution of the patient portion of medical bills. 14

15 Summary of Collection Actions Policies related to extraordinary collections activity (ECAs) (as defined by the IRS— i.e. liens, credit reporting, lawsuits, wage garnishments, or sale of debt) are board approved, and communicated to and practiced by collection agencies. Ongoing provider efforts to educate patients about the account resolution process including informing patients of the ECAs that are board sanctioned. If account is delinquent, communicate to the patient that the potential exists for all board-approved ECAs (including reporting to credit bureaus) prior to initial placement. 15

16 Tracking Patient Billing/ Collection Complaints All business affiliates involved in account resolution activities are required to report patient complaints. Review by management teams to monitor billing/registration and other revenue cycle issues that result in inappropriate accounts sent to collections Call audits and other quality assurance activities to ensure that policies are followed and provide process improvement 16

17 Access to Financial Assistance Policy All collection efforts (either internal or external) should adhere to internal written/formal provider collection policies, which include but are not limited to screening individuals for and applying charity care/financial assistance policies to those who are eligible and permissible account resolution tactics. 17

18 Where to Deploy Scoring Presumptive Charity filter prior to bad debt assignment and to reclassify accounts already in bad debt –“Charity of last resort” –Applied after all other funding and eligibility sources have been exhausted –Applied consistently to all patient balances –Extended to historical visits and not applied to future transactions As a prioritization tool for self-pay post-treatment –At Final Bill in business office or after treatment for inpatient patients –Used to segment work flow of counselors and Rev Cycle follow up –Integrated into IS host As a point-of-service triage tool –Used to segment work flow of counselors and follow up –Integrated into IS host –Detailed access training required Accounts failing to document in financial counseling Accounts completing Active A/R unpaid PARO Score Bad-Debt Collection Declare Presumptive Charity Bad-Debt Assignment © 2014 PARO Decision Support, LLC 18

19 Policies: Charity Types Traditional Charity Care  Patient Engaged and completes process  Usually contains documentation from the patient and is most accepted by auditors and for reimbursement purposes Medically Indigent  Out of pocket expense exceed a specified amount or ratio to household income or assets Presumptive Charity  Provider able to document specific indicative conditions Patient already qualifies for means-tested public program Deceased with no estate or known family Transient, homeless persons Persons estranged from family with no support group Persons with unknown identity Validated 3 rd party score establishing charity-qualified conditions  Patients unresponsive or incapable of completing traditional process  May not be accepted for reimbursement or disproportionate share 19

20 Presumptive Charity and Audit Presumptive scoring does not replace traditional FAP application processes; it is used to supplement these efforts Scoring/electronic screening results are used in the absence of additional information from the patient FAP requires updates to include language that: States that the Hospital recognizes that some patients will be unable or otherwise unresponsive to traditional FAP processes; and In an effort to remove barriers for these patients and improve community benefits, the hospital will utilize an electronic screening process prior to bad debt assignment after all other funding sources have been exhausted; and That the information returned via this electronic screening will constitute adequate documentation under the Hospital’s policy; and The patients eligible through this process will not be assigned to bad debt Consider language that emphasizes consistency of process p20

21 Issues Unique to Consumers Living in Poverty Basic charity application and documentation processes barriers for many, often poorest, consumers “Financial Shadows” are roughly 26 million consisting largely of minorities, low income and the young The Federal Reserve “Financial Shadows” are roughly 26 million consisting largely of minorities, low income and the young The Federal Reserve 1 in 12 Families do not have household transaction accounts – 8.7% of US Population The Federal Reserve 1 in 12 Families do not have household transaction accounts – 8.7% of US Population The Federal Reserve 33% of the uninsured are high school dropouts compared to only 7% for insured patients Employment Policy Institute 33% of the uninsured are high school dropouts compared to only 7% for insured patients Employment Policy Institute 1 in 5 consumers are functionally illiterate and cannot complete an application process US Department of Education 1 in 5 consumers are functionally illiterate and cannot complete an application process US Department of Education 21

22 Technology: Picking A Charity Analytic Elements to consider in selecting a charity model What kind of calibration occurs? –Is it calibrated to your market and your FAP? How does it handle non-traditional financial profiles? –What percent are not able to be evaluated? –When not evaluated, what does the service do? How much and which patient data is required? –SSN, name, address, other What 3rd party data is utilized? –Credit files, public records, etc. –How current are these records? –Patient permission requirements Does it utilize multiple “checks” on the recommendation? –Adequate measures for income, liquidity and asset testing Acceptance by the IRS, your Auditor and other groups? –What audit support is available? –What reporting and Community Benefit and analysis reports are available? 22

23 Sample Hospital Calibration and Validation Recommended Strategy: PARO less than 735 with FPL less than 367% and Absence of Homeownership status Deceased are included if they meet the PARO criteria Historical CharityUnknowns (Self Pay) Sample Size12741275 for $2.367 mil PARO Maximum735749 PARO Median688701 FPL Ratio Range367% to 459%367% to 462% # Accounts$ Balance Presumptive Charity based on these rules 424$0.744 mil % of file which meets presumptive guidelines 33.25% 31.43% © 2014 PARO Decision Support, LLC 23

24 Segmentation Results – POS Conversion The ability to segment the patient to the correct revenue cycle path yields results. Accounts are scored for Cash Collection and FAP need (discharge or POS) Ranking are created that indicates the correct Revenue Cycle Path Indicator 6 accounts paid at 12 time the rate of Indicator 1 accounts Indicator 1 accounts converted to Medicaid at 19 times the rate of Indicator 6 accounts Less Eligibility Predicted More Eligibility Predicted Revenue Cycle Path Indicator © 2014 PARO Decision Support, LLC

25 Community Needs Index (Income, Culture/language, Education, Insurance, Housing Elements) CNI was developed by Dignity Health © 2014 25

26 Distribution by Community Need Strong correlation between PARO Presumptive Charity approvals and CNI illustrating the ability for PARO to help provide proof of benefits under Community Needs Assessment planning © 2014 PARO Decision Support, LLC 26

27 Leverage your Historical Data – Density Mapping 27 © 2014 PARO Decision Support, LLC

28 Compliance and Timing – What to Do Now Take this opportunity to reaffirm that the hospital organization currently satisfies all of the express requirements of Section 501(r) of the Tax Code (which are currently in effect). Begin compliance efforts now by reviewing existing financial assistance policies, charge methodologies, and billing and collection policies and procedures. –The tax community anticipates that the final regulations will generally track the overall framework of the proposed regulations. –The tax community does not anticipate lengthy transition relief once final regulations are announced. –Hospitals should be mindful of their responses to the questions on Form 990, Schedule H, that address their financial assistance policy, billing and collection policy, and emergency medical care policy, and regarding how a hospital charges individuals eligible for financial assistance. Develop implementation process and train staff. Inform governing Board of new requirements and secure Board approval for new policies Involve professional advisors to help ensure that all regulatory issues are addressed. 28

29 Financial Assistance Policy (FAP) – Fundamental Elements 29

30 PFS Interaction– What to Do Now Perform a Readiness Assessment NOW Review and Revise your new FAP (considering using an outside expert – avoid a search and replace approach ) Publish your new FAP Train your Staff (including applicable vendors) with initial training and periodic updates Monitor Performance and seek “lessons learned” Start telling your Story – FAP is valuable to your tax status and your community – share the results in terms of patients served 30

31 Question and Answer 31

32 Additional Resources and Contact Information Special Thanks to Mark Rukavina. Mark is the Principal at Community Health Advisors, LLC and has served on a number of HFMA task forces including the Bad Debt and Collection Task Force. His firm provides services related to design and develop for Financial Assistance Policies, Community Health Needs Assessments, and other outreach program. He can be reached at or or (617) Debra Stall (615) 633-4663 Neil Smithson (954) 530-2442 32

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